What Does a Mortgage Underwriter Do?

A mortgage underwriter works for a bank or other mortgage lender. They are responsible for determining the eligibility of a borrower for a mortgage loan based on the lender’s guidelines.

An underwriter will review documentation like bank statements, pay stubs, appraisals, and credit reports to determine the creditworthiness of a borrower. Based on this review, the underwriter may approve the loan, deny the loan because it does not meet the lender’s guidelines, or ask for additional documentation for further review.

Let’s take a closer look at some key information that an underwriter might review for a loan decision.

Income Documentation

A mortgage underwriter routinely determines the borrower’s income by reviewing such things as pay stubs, tax returns, 1099s, and other pertinent income documentation. They will calculate various sources of income like monthly salary, overtime, rent, self-employed income, social security, child support, and alimony.

Assets

The underwriter will often need to review assets statements to determine if the borrower has enough money saved for the cash to close the loan or for any reverses that are required for the loan approval.

Credit

A borrower’s credit plays an important role in most mortgage underwriting decisions. The underwriter will commonly review the borrower’s credit report to determine loan eligibility. Lenders often require a certain credit score or an established credit profile for a loan approval.

Appraisal

An underwriter is responsible for reviewing the appraisal of the subject property. They will determine if the comparable sales supplied by the appraiser support the value represented on the appraisal. They must also look out for potential issues with the property or surrounding area. For example, the appraisal photos may show major interior damage. This may potentially be something that the lender may not want to lend on for mortgage purposes.

Title

The underwriter will typical examine the title to make sure the appropriate party currently holds title to the subject property. For example, the underwriter would ensure the borrower currently holds title on a refinance transaction since this is a property they already own.

Purchase Agreement

The purchase agreement reflects the terms of the sale of the subject property between the borrower and seller. The underwriter often examines this agreement to determine if the sale meets the lender’s guidelines.

Customers

The underwriter is often in contact with the loan officer or processor who initially submits most of the documentation mentioned above. The underwriter will condition (ask for) additional documentation from the loan officer/processor if it is needed for the loan determination. They will also communicate loan denials with the loan officer and discuss any potential ways that the loan denial can be reversed.

Automation

Many mortgage lenders use computer programs that help determine the eligibility of the borrower. The underwriter will input the calculated income, assets, appraisal value, debts, and other relevant information to the loan. The computer program will determine eligibility of the borrower based on this inputted data.

Misrepresentations

An underwriter must always be on the look out for misrepresented documentation in the loan file. Any red flags must be examined in detail to determine if there is an issue with misrepresentation.

Salary

According to salary.com, the median salary (U.S. National Averages) is $50,647 for a Mortgage Underwriter I. Of course as you gain experience, this salary increases. The average for a Mortgage Underwriter IV is $89,591.

Conclusion

The above information should give you an understanding of what a mortgage underwriter does on a daily basis. Of course, the duties of the underwriter will vary from company to company. Additionally, as an underwriter gains experience they tend to take on more responsibility with riskier or complex loans. A person just starting out may begin as an underwriting assistant and gradually move into being a regular underwriter as they become comfortable reviewing the various mortgage documents.