Hopefully, most home loan borrowers understand that the loan officer they meet with face-to-face is only one piece of the puzzle when it comes to approving a home loan application. The underwriter – the “behind the scenes” person that the borrower never sees – is an equally, if not more important, part of the equation. In the mortgage industry, all home loan applications undergo an underwriting process to determine if the applicant is qualified to take on a mortgage in terms of their credit, income, employment history and down payment funds; the underwriter is the one who performs that process by verifying the applicant’s information and pushing the loan through to approval.
Additionally, the underwriter is tasked with ensuring that the tax, title, insurance and closing documentation is in place on the loan. He or she is also required to verify the accuracy of the appraisal that was done on the property in order to confirm that the amount of the loan is comparable to the value of the home. Think of it this way: While your loan officer is your guide through the home loan process, your underwriter is the gatekeeper to your loan approval.
Step 1: Automated Underwriting
In order to pre-qualify any applicant for a home loan, the loan officer performs an automated underwriting first. Automated underwriting is the process of running the applicant’s information through a computer program to determine if the basic qualifications are met for a home loan. But remember, a pre-qualification is not the same thing as a pre-approval; it is merely a “first step” towards approval. The next step is to present the borrower’s information to the underwriter.
Step 2: Manual Underwriting
Underwriting is the process of scrutinizing a loan application to assess the accuracy of the data entered into the automated underwriting system by the loan officer, and therefore the risk of the applicant. No applicant becomes a home loan borrower without an underwriting process. Now, let’s examine the difference between underwriting at a bank vs. at a direct mortgage lender.
At a bank, the underwriter is someone that the loan officer typically never sees; in fact, the person is usually not even onsite. In most cases, the underwriting is done thousands of miles away and the loan officer receives an approval or denial, period. If the application is denied, the loan officer may never be given the opportunity to present any of the borrower’s mitigating circumstances to the underwriter; in that case, the denial would be the final word.
Contrast that with what happens at a direct mortgage lender with an in-house underwriter (yes, like Wholesale Capital Corporation!). Here, our in-house underwriter has access to our loan officers. If there are any “gray areas” on a borrower’s loan application, our underwriter can speak with the loan officer about them directly.
Together, they can determine whether a.) certain conditions need to be fulfilled before the loan can be approved, or b.) we can offer some flexibility in order to approve the borrower. With an in-house underwriter, the loan officer can provide feedback on the borrower’s situation and improve the chances of the borrower being approved for the loan. This is especially useful for borrowers who might have red flags on their application in terms of employment history or credit score.
With in-house underwriting, the borrower’s application is given careful, customized consideration that helps increase the chances of an approval. And when an approval just isn’t possible, the in-house underwriter can explain why so that the loan officer can give the applicant the advice that is needed in order to qualify.
Other Advantages of In-House Underwriting
Another big advantage to having an in-house underwriter may be faster loan processing, which would likely be followed by faster funding of the loan. That would be a clear gain for borrowers, and it would benefit the sellers they are buying from as well.
At Wholesale Capital Corporation, we are a direct mortgage lender with our own in-house underwriter – and so, the advantages of in-house underwriting are typical of our process. If you have any questions on mortgage underwriting or you are interested in applying for a home loan, contact WCC at (855) 640-2020 and ask to speak with a loan officer – or, call the number your WCC loan officer provides you.
Wholesale Capital Corporation is not affiliated with or acting on behalf of or at the direction of the Federal Housing Authority (FHA), the Department of Veterans Affairs (VA), or any government agency or government-sponsored entity. WCC is licensed by the California Bureau of Real Estate, Broker License #01147747 and CA Finance Lender’s License #603K610. Also licensed in Arizona by the Arizona Department of Financial Institutions, MB #0926199. Equal housing lender.