Key Parameters Considered in Mortgage Underwriting

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man wearing a suit sitting in a table showing a mortgage loan contract and where the signer must sign

Like 98% of homebuyers, you might need a mortgage to make your dream homeownership come true. There are different steps involved in the mortgage application process and understanding them before you start your application will boost your chances of getting approved.

One of the critical steps is the underwriting process. This is the process of risk assessment used by a lender before they can advance you the loan. Different lenders will look at various parameters for their underwriting process.

Community-based credit unions have some of the most flexible parameters for their home loan approval for Ogden clients and those in other areas. They are the best choice if you want the highest odds of qualifying for a home loan. The following are among the primary factors a mortgage lender will consider in the underwriting process:

Capacity

This denotes your ability to meet your monthly payments. Here, a lender assesses more than your income and debt. They also consider the stability and durability of your job and your age. If you are young and in relatively stable employment, then you boost your chances of qualifying for a mortgage.

Self-employed applicants can prove their stability using their tax returns, balance sheets, and profit-and-loss statements. The best way to boost your capacity further is to reduce your debt obligations as much as possible before applying for your home loan.

Mortgage loan agreement application with house shaped keyringCharacter

This encompasses your willingness to meet your monthly repayments. Your lender will evaluate this by going through your history of making prompt payments on your previous loans. Mortgage borrowers who frequently consolidate or refinance their debts might not get favorable terms. If, however, you have a detailed explanation on what has been the cause of your late payments in the past and show consistent prompt payments for some time before your application, this will boost your character.

Capital

This includes your liquid assets. If you can afford a substantial down payment and comfortably meet your mortgage’s closing costs, a lender might approve your loan without so many checks. Lenders will also favor clients who have a consistent savings pattern. Having a savings account with a credit union will work in your favor. Moreover, this will help you save for your down payment.

Collateral

This denotes the value of your property. Most lenders will need you to pay an appraiser they choose to value your property and determine if it is worth the price you are buying it for. The valuation also helps your lender assess if they can sell the property and recoup their loan should you default on your repayment.

The mortgage underwriting process is one of the longest and most harrowing for borrowers. Lenders will find all manner of excuses at this point to either deny your application or give you a mortgage with harsh terms. Now that you understand what your lender will be basing his/her decision on, you are better placed to change the elements to work in your favor. Most credit unions can also offer invaluable advice on what you should improve to make you an attractive mortgage borrower. They should hence be the first stop for anyone looking to buy a house.