I've Applied for a Mortgage:
What is Automated Underwriting?
If you've read much about Mortgage financing ... or talked to a Mortgage Lender lately, you've probably heard the term "Automated Underwriting" ...
This form of Underwriting, performed electronically by a computer, has become the method by which the majority of banks and lending institutions make a decision regarding the "lendability" of a potential Borrower. It's the analysis of all relevant financial data collected from an Applicant.
First implemented in the late 1990's, Automated Underwriting has now become the preferred method of analyzing Mortgage Applications. The 2 most obvious pluses found in Automated Underwriting are:
- The results are deemed more objective and void of human prejudices or bias
- Results are typically received much more quickly than those obtained from humans
As a Mortgage Lender assisting my Applicants, I want to be able to supply our Automated Underwriting with the best and most complete information available. That means prior to submission, I must be thoroughly knowledgeable as to what will be demanded by the Automated System to receive an Approval for my clients. The better educated I am regarding Underwriting demands, the more likely it is I (and my clients) will find success with any file.
An Automated Underwriting system considers the basics, or "bones" of an Applicant's finances. It considers:
- The Applicant's Outstanding Credit
- Credit History
- The Value (Appraisal) of the Property being financed
- The type of Mortgage Financing being applied for
- The Applicant's capability to repay their Mortgage
- The Applicant(s)' Income
- Their Employment
- Their Bank Accounts
- and More ...
The above information must be fully-supported by documentation. Physical proof of income (including copies of paystubs, W-2's, etc.), bank statements, tax returns, any decrees/judgements, investment accounts, and more may be required from a Mortgage Applicant prior to submission of their file in to Automated Underwriting. (For a Checklist of those items typically needed for Mortgage Application, click HERE).
Underwriting is where a Mortgage Lender's level of experience and expertise come into play and pays-off for the client. An experienced Mortgage Lender will know the "ins-and-outs" of any Mortgage Program's Underwriting requirements and fully-prepare their Client and their loan file prior to submitting it for Underwriting Approval. Fewer issues will need to be addressed after submission as a result.
While the goal for the client and Lender is to obtain an "Approval or Accept" rating, it's only the beginning. The full processing of the file then begins, and the second or "neutral" layer of verification of income and assets then occurs.
Receiving the Automated Underwriting Approval simply allows a file to move forward to meet the review and scrutiny of the human portion of the Underwriting Process, where the validity and accuracy of the supporting data and loan application are attested to.
When all goes well, the objective becomes to first obtain the "Clear to Close" from the human (more formal portion) of the Underwriting review process. Then all the parties involved within the transaction must structure the Closing date and contribute numbers and figures for that Closing.
I've Applied for a Mortgage: What is Automated Underwriting? Automated Underwriting is important to the Mortgage Process and to Borrowers. It's the "test" that a Borrower's finances and documentation must pass in order to continue on to the ultimate Mortgage nirvana ... the Closing.
* Hoping to Buy, Refinance, or Construct a home in New Lenox, another Lincoln-Way Community, Will County, or elsewhere in Chicagoland? Contact me! I'll assist you from first contact, through Pre-Qualification, Automated Underwriting, and on to successful Mortgage Closing.
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