There are a lot of things to get tripped up on during the home buying process, one of which is acquiring a loan. We’ve already discussed the difference between prequalification and preapproval, so now let’s take a look at full underwriting approval. What does it mean, what’s required, and how long does it take?
We know what “full” and “approval” mean, but what exactly is “underwriting”? According to Investopedia:
The word “underwriter” is said to have come from the practice of having each risk-taker write his or her name under the total amount of risk that he or she was willing to accept at a specified premium. In a way, this is still true today, as new issues are usually brought to market by an underwriting syndicate in which each firm takes the responsibility (and risk) of selling its specific allotment.
A mortgage underwriter is a credit analyst who will ultimately approve or deny your credit request. Underwriters, according to RPFunding.com, use a process called layering during which “they assess the total risk by reviewing all the different factors to determine your credit worthiness. This layering process allows an underwriter to identify several key factors that consistently surface as red flags for risky loans.”
This means that following pre-approval, you’ll be asked to provide required supporting documents to your loan representative who will in turn submit them, along with your loan application, to the underwriter. The underwriter will then either approve, approve with conditions, suspend (meaning more documentation is required), or deny your application.
The majority of loan applications are “approved with conditions.” These borrower conditions normally fall into three categories: explanation and correction of anomalies, verifications and attestations, and supplementary documentation. An explanation and correction of anomalies refers to inconsistencies in credit reports and official explanations of pay stubs, tax statements, wages, etc. Verifications and attestations refer to verifying income, employment, rental/housing history, and gift funds. Lastly, supplementary documentation refers to handing over more credit, profit, loss, and account statements.
Once you find out your loan has been approved with conditions, ask your loan representative for the approval sheet that lays out the requirements and borrower conditions. Once you’ve signed your loan documents, obtain a copy of the remaining conditions from the closing agent. Make sure you leave enough time to make any corrections or settle any irregularities, as the loan approval could expire before all conditions are met.
Keep in mind that the full underwriting approval timeline depends on how much information you bring to the table from the start. Gathering all of your income, employment, credit, and any other pertinent documentation before applying, and submitting all requested follow-up documentation to the underwriter as soon as possible can significantly speed up the process. Under these circumstances, full underwriting approval can take just a few days. On the other hand, going over a borrower’s credit and financial history as well as the worth of the home can take time; therefore, on the long end, the process can take up to a few weeks.
What is Full Underwriting Approval? by HouseHunt