loan underwriting process

Approve Your Loan Effectively By Undergoing The Loan Underwriting Process!

Every business owner, entrepreneur, or even a salaried employee wishes to flourish their business or fulfill their long term goals. A large amount of capital is the key commodity required to accomplish any short term or long term goals. It takes a considerable amount of investment to start a new venture hence individuals tend to go request for a loan from a bank or a private lender. However, in any scenario, you must have the knowledge of the flow of the loan underwriting process to undergo a smooth approval of the loan amount.

The loan underwriting process involves the verification of your income, assets, debt, and property details in order to issue final approval for your loan. The underwriter analyzes your finances and assets to make sure that you will be able to repay the amount on time. He also ensures that you don’t close on a mortgage that you can’t afford. 

Here are the major tasks performed by the loan underwriter:

1. Investigation of your credit history

The underwriter pulls your credit report to have a look at your credit score. They mainly search for flaws like late payments, bankruptcies, credit overuse, and much more. Your credit score typically indicates how responsibly you pay back your debts. A good credit score helps to get your loan approved quickly and may lower the interest rate of upcoming loans. However, the underwriting has been made hassle-free with loan origination software.

2. Order an appraisal

The appraisal is ordered by the underwriter to make sure that the amount offered by the lender for your home matches up with the home’s actual value. The appraiser inspects the property to evaluate the condition and features of the home. Your home is compared with similar properties around having the same location, size, and features. After the value of the property is placed by the appraiser, the underwriter compares the appraisal amount to the mortgage amount. If the amounts roughly match, your application is likely to get approved otherwise it is rejected.

3. Verify your income and employment

During the loan underwriting process, the underwriter investigates your current employment and income details. It is crucial for him to make sure that your income is enough to cover your mortgage payments every month. For this, your bank statements and cash flow in your account are monitored before approving your loan request. If you are self-employed, you are required to furnish a few documents as proof that your business tends to flourish in the coming years. Whereas, if you are a salaried employee, your employment situation is verified with your employer.

4. Look at your debt-to-income ratio (DTI)

Your debt-to-income ratio suggests how much money you spend versus how much income you bring in. Hereby, the underwriter examines and ensures that you have more than enough cash flow to cover your monthly mortgage payments, taxes, and insurance.

5. Verify your down payment and savings

The underwriter also ensures you have enough savings to supplement your income or to use it as a down payment at closing by analyzing your bank account.

BOTTOM LINE

Prior to the acceptance of your loan application, your past finances and past credit decisions are evaluated for a smooth process of loan approval. However, the underwriting process is automated with the launch of credit analysis software.

 

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