There are over $14 trillion dollars of outstanding mortgage debt in the United States as of June 2010, according to the Federal Reserve. Mortgage lending is a huge industry in America, even after the 2008 financial meltdown and the shrinking pool of credit. Mortgage loans make up a large percentage of the total consumer debt load in the U.S.
Mortgage lending is a thorough process that involves lenders making comprehensive background checks on the financial and credit history of the borrower. In addition, the borrower’s identity is scrutinized and verified before even considering lending to them. The tighter lending standards have resulted in borrowers having to go through strict protocols before gaining access to funds.
When originating mortgages, lenders underwrite the loans. The mortgage underwriting process begins when a potential borrower completes the pre-qualification documents. These allow the lender to conduct a cursory examination and determine whether the borrower minimally qualifies for a mortgage loan. Once the borrower is cleared past this initial stage, they move on to the actual application.
The application is typically a long document that covers everything related to the loan origination process. The proposed property to be mortgaged is appraised by a real estate professional in order to determine whether the proposed loan amount matches the home’s current price. The borrower’s employment history, credit history and other financial histories are closely examined for any inaccuracies, errors or falsehoods.
It is important to understand that the underwriting process is the same whether the mortgage is for residential, commercial or investment purposes. Borrowers seeking investment property mortgages generally have to go through a slightly different process because there is more information for the lender to verify. After the underwriting process is completed, the borrower will probably be approved for their loan if they have filled out their forms honestly and met each qualification.
Mortgage underwriting is simply verifying borrowers’ information.