Mortgage underwriters are responsible for determining borrower
risk and ultimately whether or not to approve the loan requested, must rely on
receiving timely and accurate documentation provided by the borrower.
The job of the underwriter is to compare the loan application
with the credit profile and supporting documents provided by the borrower with
the requirements of the loan program offered by the lender. The underwriter
issues a formal loan approval on behalf of the lender and also takes on the
responsibility of understanding and communicating investor guidelines in
conjunction with each transaction. The underwriter will make thorough
investigation based on all the documents and in the event that the borrower has
made any claim without providing supporting documents, it is the responsibility
of the underwriter to ask for clarification documents. He or she will also check
to see if there are any inconsistencies in the application or information
provided. Also, it is their job to see whether the borrower will be able to make
timely payments based on the supporting documents and other information. The
underwriters often set the desirable loan amount and determine the conditions
under which the transaction can close.
A lender will review a loan prospect and concentrate on four basic categories. These categories are: credit, collateral, cash and cash-flow.
Credit addresses the amount of debt and financial obligations that currently exist and how well those relationships have been maintained.
Collateral addresses the property you wish to finance. Guidelines may vary for multi-family homes, condominiums as compared to a single family residence.
Cash addresses the resources you have to put toward a down payment and the other expenses of buying a home. These other expenses are closing costs, escrows, pre-paids, advance insurance and cash reserves.
Cash-flow addresses the amount of income coming into a household and the amount going out. The percentage of income allocated to housing costs and all other obligations is identified. Industry guidelines identify minimum guidelines for those areas and the lender will review all the documentation provided by a loan customer as it relates to those four basic categories
The Uniform Residential Loan Application (URLA) #1003 contains the following acknowledgement agreement requiring all mortgage applicants to sign and date. All lenders use the same application.
IX. ACKNOWLEDGEMENT AGREEMENT