Mortgage Underwriting Process: Everything You Need to Know

Published on November 11, 2017

– 8 min read

You’ve arrived at the underwriting process. At this point in the mortgage journey, you did your research and have your documents prepared ahead of time. You sorted your way through the disclosure package and signed your required documents. You provided your Intent to Proceed, and your appraisal is ordered.


In the mortgage underwriting process, your home loan file gets handed off while you just kind of…wait. Your lender has to verify all of the information you gave them. This process is called underwriting.

Sure, the lender has your tax returns, but now they will ask the government for the same documents and make sure they match. Then they will go to your banks and make sure all that money you say you have is, indeed, in your bank account. They will go through this verification process with just about everything you provided. This includes verifying your credit card debts, any other loan amounts or payments, your bank deposits, your investment and retirement account balances, and your living history.

Many people don’t realize this, but the lender is going to verify your employment as well. In some cases, they’ll use a third-party service to do this. But there’s a chance they’ll just call up your office and ask for human resources, so give your employer a heads-up.

The person handling your loan file at this stage is usually a loan processor. It’s their job to get this research done. When they have what they need, your loan moves along to the underwriting process.

Mortgage underwriting process

It’s the underwriter’s job to decide whether or not you qualify for the loan. They are like a detective—they’re going to investigate your personal finances and the property to assess the lender’s risk. Then they compare these things to investor or company guidelines and decide whether or not to approve the loan.

The goal of the underwriting is to assess both the property and your ability to repay. To determine whether or not to approve the loan, they are concerned with three things: capacity, credit, and collateral.

  1. Capacity – Do you have the willingness and ability to repay this debt? Can you actually afford to pay back this loan?
  2. Credit – Do you have a history of paying back your other debts? Do you pay these other debts on time and without issue?
  3. Collateral – Is the fair market value of the property enough to cover the debt? Does it meet the guidelines required for the loan product?

The loan processor and underwriter may pass your loan back and forth a few times. The underwriter may need clarification on something. The processor will come to you and ask you to explain things like a large transaction, or provide verification that, yes, you did close that old Circuit City credit card. Once the processor has what they need, the file goes back to the underwriter for review.

As your loan moves through the underwriting process, just know that obscure, nitpicky things are going to come up, and it’s part of the process.

So how long does mortgage underwriting take? Well, it’s a generally slow process. At Clara, we’re building a streamlined mortgage underwriting process with technology to facilitate quicker turnaround times. Even still, this process takes days and in most cases, you’ll be sitting on the sidelines while the processor and underwriter do their thing. Instead of sitting idly by, however, you can use this time to check a big item off of your list: getting a homeowners insurance policy.

Conditional approval

When you receive conditional loan approval from the underwriter, congratulations! As long as you can satisfy these conditions, you have the green light to close your loan.

Now you might be wondering, how long until close after conditional approval? This is a giant step in the process, but don’t party too hard yet. There are still a few things that need to happen between this point and signing your closing documents.

Your underwriter will give you what’s called a “conditional approval.” That means that you are approved for the loan as long as you meet certain criteria, called closing conditions. Some common closing conditions are:

  • Having a home insurance policy by the time of closing
  • Title work – You aren’t the only one with some work to do. The lender may have to finish researching the title of the property. Ideally this is completed prior to this stage.
  • Having your cash to close ready
  • Verifications – The lender may once again verify your employment, income, deposits, and a number of other things to ensure nothing changed throughout the process.
  • Updated bank statements, investment account statements, and debt statements – If your loan took longer than 30 days to close, you may need to provide the most recent statements for all of your accounts
  • In some cases, you’ll need a “minimum reserve” of cash. An example of this is a loan product that requires you have 6 months worth of payments in cash after closing your loan.

Once these final items have been collected, your loan file goes back to the underwriter one last time. This time it should be a (relatively) quick turnaround. If all is well, you’ll get the ultimate stamp of approval and you are clear to close your loan.

Clear to close

Once you are clear to close, you need to make sure you don’t do anything that will affect your qualifying factors. The most common slipup here usually comes down to credit cards. Once you are clear to close:

  • Don’t open a new credit card.
  • Don’t start buying furniture on your existing credit cards.
  • Don’t finance the purchase of new furniture.
  • Don’t get a personal loan so you can start prepping for that bathroom remodel.
  • Don’t buy a new car with an auto loan.
  • Don’t start funneling money around between your bank accounts.

If there is any major change in your credit score, it can keep you from closing. If your minimum monthly debt payments change on your credit card, or you have a new loan payment, it can affect your DTI ratio and keep you from closing. If you transfer money between banks, and the money doesn’t show up in your account in time, it can (you guessed it!) keep you from closing your loan.

Ideally, you will consolidate your funds prior to your application to avoid issues here. Save any major purchases until after you leave the closing table.

If you have any questions about the mortgage underwriting process, chat with one of our licensed Loan Specialists or get pre-approved now completely online.

Steven Fung
Steven Fung is a licensed Loan Specialist at Clara with over 17 years of experience. When he doesn’t have his mortgage hat on, he enjoys repairing old cars and working on home improvement projects.
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