In-House Underwriting: Top Criteria & Benefits You Must Know

Are you in the last stages of your home loan application? Now that you’ve gone through the tedious process of rate locking, appraisals, and inspections, you may be wondering what comes next, which brings us to the underwriting process. It may sound frightening at first, but it becomes much less intimidating once you understand what it includes. So let’s go over the complete underwriting process so you can get some peace of mind as you wait for the approval.

When you apply for a home loan, the underwriting takes place behind the scenes. However, this process determines whether or not you’ll be approved for your loan.

Mortgage lenders and underwriters can communicate more effectively about the facts of your mortgage application with in-house underwriting. This can make all the difference in getting accepted for a mortgage.

An “in-house” underwriter talks with your direct mortgage consultant to explain your position. They also gather more data if the underwriter requires more information to explain any red flags, such as gaps in employment or credit concerns.

It has the potential to boost your chances of receiving approval quickly. On the other hand, delays can result in expensive penalties for missing deadlines, and you may even miss out on your ideal property.

When a loan officer and an underwriter work for the same company and are situated in the same building, this is called in-house underwriting. Their physical proximity expedites and smooths out the process. There are a few reasons why you should look for lenders who undertake their underwriting when applying for a mortgage.

Read More: Manual Underwriting Vs. Automated Underwriting: The Complete Guide

Types of Underwriting: Manual & Automatic 

  • Underwriting can be done in a variety of ways. Traditionally, manual underwriting is done by a loan officer. This process involves entering all applicants’ information into the system before sending it to the underwriter for evaluation.
  • Some mortgage underwriting is automated to save time and money. Computer software processes the application once the loan officer has entered all required information. Then, before providing permission or refusal, the computer compares the data to a formula to assess the transaction risks.

While computerized underwriting is faster, it frequently denies mortgages to many well-qualified consumers. 

Automated underwriting systems, for example, regularly reject affluent retirees, self-employed individuals, and commissioned salesmen because their income status is irregular or discordant with the overall picture. The algorithm rejects the loan since it is outside the usual excellent credit standards.

These are instances where a loan officer may need additional information to assess an applicant’s credit risk outside of the automated procedure. With this new information, the mortgage underwriter may do a more complete analysis and provide permission instead.

What Does an Underwriter Look for When Making a Decision?

Let’s take a look at how an underwriter decides whether or not you qualify for a mortgage.

Credit score/history: Your credit score/history shows how likely you are to repay your mortgage. It also affects the interest rate you’re eligible for.

Prequalification: This occurs before the underwriting process begins. Your lender will verbally utilize the information you provide to estimate the loan terms you are eligible for.

Appraisal: An appraisal verifies the home’s worth and must be at least as high as the purchase price. Many evaluations are being done as drive-bys or waived entirely in the wake of the COVID-19 outbreak, especially for refinancing.

Debt-to-income ratio (DTI): A lender analyses your monthly debt commitments to your monthly income, including your new mortgage payment, to determine your debt-to-income ratio (DTI). The DTI limit varies per lender, but it can be as high as 50%.

Employment history: Traditionally, lenders would call you within ten days after closing to verify your employment. 

Because of the current employment market’s volatility, the time range has been shortened to five business days before closure, or even sooner, such as the day of closing. 

Because many employees work remotely, lenders are increasingly accepting email confirmations.

Income verification: You’ll need to present pay stubs to establish consistent income. 

You should expect to be requested for your most recent pay stub during underwriting. This is because some lenders, as previously noted, are searching for more recent proof of income documentation.

Mortgage type: Mortgage program: Each mortgage program has its own set of standards for things like credit score, debt-to-income ratio, and even property conditions.

Benefits of In-House Underwriting

The mortgage underwriting process can take anywhere from a few days to weeks. Your loan type, financial situation, missing paperwork, and issues with property surveys or title insurance are all things that can affect how long it takes an underwriter to approve, suspend or deny your mortgage. Here are some of the stellar benefits of In-house underwriting. 

In-House Underwriting Saves Time & Effort

Underwriting in-house can save a lot of time. The entire mortgage underwriting process is significantly more effective when everyone works together under one roof. Instead of passing your file on to an anonymous underwriter, your loan officer may keep track of it. 

After dealing with the same underwriter, the loan officer will have a solid notion of what to look for and how to present all facts for the applicant’s best chance of success. Moreover, when the underwriter obtains the application information, it is easy for an in-house underwriter to call the loan officer if any difficulties or missing items need to be discussed, resulting in seamless and timely communication. 

Scope for Enhanced Communication

In-house underwriting facilitates the connection of all parties concerned for a faster conclusion. When an outside underwriter is not engaged, it is easier for the lender, realtor, and buyer to keep in the loop, making the procedure more manageable and less stressful. If there are any complications, the loan officer and underwriter are aware of how they may work together to address problems and iron out any wrinkles as fast as possible.

Better Customer Service & Chances of Getting Approved

The most significant benefit of in-house underwriting is that we treat you like a genuine person with a unique narrative and scenario. Your loan receives the individualized attention it deserves since your loan officer and underwriter are located under the same roof. If you have a modest income but significant savings, a computer-produced report may cause your application to be rejected.

Faster Closing Time 

Another way that in-house underwriting saves time is under writers may frequently pre-approved loans for their lenders, giving you a decent indication of what you’re up against when it comes to your mortgage. They are already familiar with your application when it comes time for them to formally assess it after you’ve accepted to take the loan, which saves you time. Overall, if you select a lender that performs in-house underwriting, you can close in days rather than weeks or months.

Compared to lenders who submit their applications to outside underwriters, having both your loan officer and mortgage underwriter work for the same lender is highly efficient. The mortgage underwriting procedure gets you final clearance for your home loan, allowing you to close and move into your ideal home.

Underwriting criteria have tightened due to the epidemic, and they may continue to evolve. Therefore, expert assistance and guidance are required to make the entire process smooth & hassle-free. 

Find a Mortgage Lender in Texas 

Lone Star Financing stands out among Texas mortgage lenders because we have years of experience and knowledge in the field. In addition, we employ in-house underwriting and processing to make speedy decisions and close loans on time — typically in as little as 28 days. Contact our lenders in Texas today to learn more about VA loans in Texas and other financing options.

Learn More: VA Home Loan v/s Conventional Home Loan: Choosing the Best Loan Option