How to Understand Mortgage Underwriter Comps

Underwriting is the process by which a mortgage loan is reviewed and accepted as a solid risk. One major part of the underwriting process is property valuation. Underwriters usually look at an appraisal--conducted by an independent appraiser--to make sure the property value supports the loan and is an accurate value. To do this, they must review comparable properties on the appraisal report.

Instructions

1. Learn what an appraisal contains. When preparing their reports, appraisers look at the square footage, number of rooms, number of bathrooms, any recent improvements, soundness of utilities such as heat and water, and the general aesthetic condition of a home.

2. Understand how appraisers pick comps. "Comps" is short for comparables. To get an accurate market value, appraisers must compare the property in question to similar properties that have sold recently in the same area--if possible, the same neighborhood.

3. Learn to read an appraisal. When looking to see if the comps are fair, you must review the subject property and any comparable side-by-side. This means making sure the square footage is similar and the number of rooms is similar.

4. Understand why an underwriter may reject a comp. During the underwriting process, the underwriter may disagree with the appraiser's selections for comps. If an underwriter thinks any comp is unfair or inaccurate, a second appraisal may need to be conducted, usually with a different appraiser.

References

• Bankrate: How Much is Your House Worth?
• Bankrate: 12 Tips to Buying a Home at Auctions