Underwriting 101

Underwriting is the lender's process of calculating the risk of lending money to you. The mortgage lender must determine whether you can pay back the home loan before deciding whether to approve your mortgage application. A mortgage underwriter's job is to assess risk, meaning the entire risk if you would not repay the mortgage. Therefore, the underwriter evaluates factors that help the lender understand your financial situation, including:

· Your credit score

· Your credit report

· The property you plan to buy

During the process of home approval, there are two types of underwriters. Although they have the same job title, their responsibilities differ, and here is the definition of the role that each has during the process:

· The financial underwriter – this is the individual that will authorize or decline your ability to get approved for a loan. They review the risk the financial institution will take on by lending you money.

· The title underwriter will examine the title and check for possible issues that could arise during and after getting the house, building, or property title. If they feel the title is clear and you can take control, they'll approve you for a title insurance policy.

Both work closely with the title company, but they do different things. Both of the underwriters work independently of each other. Each plays a crucial role in a real estate transaction. Once your mortgage is approved, your home purchase is almost complete. The last step is closing day, when the lender finances your loan and pays the selling party in return for the property title. This is when you'll sign the final paperwork, resolve any closing costs and receive the keys to your new home.

Although both of the underwriters will be used interchangeably, they both play an important and different role. If you have any questions about the underwriters and your closing, one of our team members will be happy to assist you!

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