First-time buyer



Mortgage underwriting

August 1, 2022
Information published was correct at the time of writing

What actually happens?

THE MORTGAGE underwriting process is a key part of the mortgage application process. It is when the lender assesses the applicant’s ability to repay the loan, and decides whether or not to approve the loan. It can also vary depending on the lender. However, there are some general steps that are typically involved.

AFFORDABILITY ASSESSMENT
The first step is for the applicant to submit their mortgage application, including supporting documentation. The lender will then review the application and supporting documentation to assess the applicant’s financial situation.

Next, the lender will carry out an affordability assessment. This assesses whether or not the applicant can afford to make the monthly repayments on the loan. The assessment will take into account the applicant’s income, outgoings and other financial commitments.

APPLICANT’S CREDITWORTHINESS
Once the affordability assessment has been carried out, the lender will assess the applicant’s creditworthiness. This is done by looking at the applicant’s credit history and any previous experiences with borrowing money.

Finally, the lender will make a decision on whether or not to approve the loan. If the loan is approved, the applicant will be asked to sign a mortgage offer document. This document sets out the terms and conditions of the loan agreement.

WHAT DO MORTGAGE UNDERWRITERS CHECK?
There are many things the mortgage underwriter will be looking at and these will vary from lender to lender.

Guide to the most obvious things they’ll consider:

YOUR INCOME AND EXPENSES
The lender will want to know you can afford the repayments on the mortgage, so they’ll do thorough checks on what money is regularly coming in (like your salary) and going out (fixed and discretionary).

YOUR LIABILITIES
As part of their affordability checks, they’ll also want to know about any debts you have – as paying these back may impact your ability to make mortgage repayments.

YOUR AGE
With mortgage terms typically spanning over more than two decades, the underwriter will consider your age to check whether the term runs past your expected retirement age and that repayments will remain affordable well into the future.

YOUR CREDIT REPORT
In addition to affordability checks and any debts, your credit report will also show the lender if you’ve ever missed payments or defaulted on debts in the past. Having a good credit report is likely to make you appear less risky and more attractive to the mortgage lender.

YOUR PERSONAL CIRCUMSTANCES
They may also consider personal circumstances that could impact your financial situation. For example, dependent children, your job stability and even future earning potential could all play a part.

THE PROPERTY YOU’RE BUYING
The underwriter will also want to know about the home you’re looking to buy. While the property valuation report is separate to the underwriting itself, a review of it will form part of the underwriter’s decision-making process.

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