The underwriter’s primary job is to carefully scrutinize the potential borrower to assess whether they will be able to pay back the loan they receive within the time allotted. The clearest way to make this assessment is to review the borrower’s financial situation. Underwriters will examine:
- Debt obligations, including other loans, taxes owed, and credit cards. They will look at both the total amount owed and the current monthly payments being made.
- Monthly income, including all regular salaries, commissions, and self-employment income. This will also include money collected from investments, such as property.
- Funds available at closing; specifically, the amount that the borrower can contribute to the down payment from their own funds or from the sale of their current property.
- Credit rating, which gives a snapshot of how well the borrower has managed to maintain their debt in the past.
- Miscellaneous factors, such as job stability or responsible investment history, can also be considered in the final analysis.
Underwriters will render one of four decisions, based on the borrower’s request, history, and purported value of the home: they will either approve the loan, approve the loan with conditions, suspend judgment, or deny the loan. “Conditions” describe actions the borrower must complete prior to funding, such as completing and verifying the sale of their previous home.