How to Underwrite a Mortgage Loan

Underwriting will let you measure whether the borrower can and will pay the mortgage.

The underwriting process is one of the most important parts of the mortgage process. During underwriting, you will determine whether the seller is approved for the loan and can even take the home off your hands in the first place.Your mission is to determine whether the home buyer is a sound lending risk. If you make the wrong decision you could sell your home to someone who will only end up in foreclosure because they cannot make the payments.

Instructions

1. Verify the borrower's income. Call the borrower's employer to verify that he works in the job and at the salary mentioned on the application. Determine monthly gross income from looking at federal tax returns, W2 forms from at least the past two years, paycheck stubs, proof of other income such as a second job, commissions or bonuses, overtime, Social Security disbursements and retirement, according to BankRate.com

2. Verify assets. Look at a list of bank accounts, savings bonds, stocks or investments and their general market value. Look at any copies of titles to vehicles that are completely paid off and other assets in the borrower's name.

3. Determine debt owed. Thoroughly scrutinize the borrower's lists of creditors, credit cards, student loan debt, car debt, alimony and child support.You may need to ask the borrower to show proof of minimum monthly payments and total balances, according to BankRate. Order a credit report from the three major credit bureaus to determine the borrower's payment history. Calculate the borrower's debt-to-income ratio by adding up all of the borrower's liabilities and dividing it by the income.

4. Assess the type of property and it's value. Look at the kind of home the borrower is getting. Look at whether it's a single-family residence, duplex, townhouse condominium etc. Also consider the amount of people that will be living in the house.You'll want to know whether the owner will be living there or whether the home will be used for commercial purposes. Get an appraisal to assess the property's value. Then compare the loan to the value of the property to further determine risk.

References

• Bankrate: Necessary Paperwork for a Buyer