What Do Mortgage Underwriters Do?

August 26, 2009 45 Comments »
What Do Mortgage Underwriters Do?

Here’s some Q&A with regard to the home loan approval process: “What do underwriters do?”

Once you actually apply for a home loan, your mortgage application will be organized by a loan processor and then sent along to a loan underwriter, who will determine if you qualify for a mortgage.

The underwriter can be your best friend or your worst enemy, so it’s important to put your best foot forward.  The expression, “you’ve only got one chance to make a first impression” comes to mind here.

Trust me, you’ll want to get it right the first time to avoid going down the bureaucratic rabbit hole.

An Underwriter Will Approve, Suspend, or Decline Your Mortgage Application

Put simply, the underwriter’s job is to approve, suspend, or decline your mortgage application.

If the loan is approved, you’ll receive a list of “conditions” which must be met before you receive your loan documents.  So in essence, it’s really a conditional loan approval.

If the loan is suspended, you’ll need to supply additional information or loan documentation to move it to approved status.

If the loan is declined, you’ll more than likely need to apply elsewhere, with another bank or mortgage lender.

The Three C’s of Underwriting

Now you may be wondering how underwriters determine the outcome of your mortgage application?

Well, there are the “three C’s of underwriting,” otherwise known as credit reputation, capacity, and collateral.

Credit reputation has to do with your credit history, including past foreclosures, bankruptcies, judgments, and basically measures your willingness to pay your debts.

[What credit score do I need to get a mortgage?]

If you’ve had previous mortgage delinquencies or even non-housing related delinquencies, these will need to be taken into account.

Typically these items will be reflected in your three-digit credit score, which can actually eliminate you without any further underwriting necessary if you fall below a certain threshold.

Your history supporting significant amounts of debt is also important; if the most you’ve ever financed has been a plasma TV, the underwriter may think twice about approving your six-figure loan application.

Capacity deals with a borrower’s actual ability to repay a loan, using things like debt-to-income ratio, salary, cash reserves, loan program and more.

This covers whether the loan is interest-only, an adjustable-rate mortgage or a fixed-rate mortgage, cash-out refinance or simply rate and term.

The underwriter wants to know that you can repay the mortgage you’re applying for before granting approval.

[How much house can I afford?]

Finally, collateral deals with the borrower’s down payment, loan-to-value ratio, property type, and property use, as the lender will be stuck with the home if the borrower fails to make timely mortgage payments.

Underwriters Consider Layered Risk

Now it’s important to understand that the three C’s are not independent of one another.

All three must be considered simultaneously to understand the level of layered risk that could be present in said loan application.

For example, if the borrower has a less-than-stellar credit score, limited asset reserves, and a minimal down payment, the risk layering could be deemed excessive, leading to denial.

This is the underwriter’s discretion, and can certainly be subjective based on other factors such as occupation, how long the borrower has been in the line of work, why the credit score is less than perfect, and so on.

The underwriter must decide, based on all the criteria, if the borrower is an acceptable risk for the mortgage lender, and if the end product can be resold without difficulty to investors.

Layered risk is a major reason why the mortgage crisis got so out of hand. Scores of borrowers applied for mortgages with stated income and zero down financing, which is certainly very high risk, and were easily approved.

Rising home prices covered up the mess for a while, but it didn’t take long for everything to unravel. This is why sound mortgage underwriting is so critical to a healthy housing market.

Mortgage Underwriter FAQ

Do underwriters work for the bank/lender?

Yes, underwriters are employees of banks, lenders, and mortgage bankers. They work on the operational side of things, making loan decisions after the sales team brings the loan in the door.

Why do underwriters take so long?

Hmm…I don’t know, because they’re approving a six-figure loan amount, or seven, to a complete stranger. The actual underwriting might not take that long, but the amount of available underwriters (humans) might be low. So you could just be in the queue. A clean loan file will get approved faster and with fewer conditions so get it right before the underwriter even sees it.

Do underwriters verify employment?

While employment is generally verified nowadays when you take out a mortgage, it might not be the underwriter verifying it. Instead, the loan processor may obtain the verification of employment (VOE). Many use the “The Work Number,” an independent third-party employment verification company now owned by credit bureau Equifax.

How much do loan underwriters make?

They can make pretty good money. Salaries may be in the high five figures to low six figures if they’re seasoned and skilled in underwriting all types of loans, including FHA, VA, and so on. If you start as a junior underwriter the salary could be less than $50,000. But once you become a senior loan underwriter, the pay can jump up tremendously. It may also be possible to earn overtime.

Do underwriters make commission?

They shouldn’t because that would be a conflict of interest. They should approve/deny loans based on the characteristics of the loan file, not because they need to hit a certain number. Compensating them for loan quality might be a different story, but again could lead to discrimination if they cherrypick only the best loans.

Do underwriters work weekends?

I’ve heard of some that have. I don’t know if they do on a regular basis, but if loan volume picks up in a short period of time it’s possible to come in on a Saturday or Sunday. The mortgage world is all about highs and lows, so sometimes it might be slow and other times it’s impossible to keep up.

Are underwriters warm and friendly?

They can be if you don’t rub them the wrong way. I look at mortgage kind of like the DMV. Show up with the right paperwork and a good attitude and you’ll get in and out before you know it. Do the opposite at your peril!

(photo: Joelk75)


  1. Colin Robertson July 18, 2017 at 8:43 am -


    That stuff may not even show up on your credit report if it’s seven or more years old. Have you checked your own reports (all three bureaus) to see what’s on there still? Even if it is, your higher credit score now reflects the efforts you’ve taken to clean up past mistakes, and ideally an underwriter will understand that even if they do stumble upon anything. If there is lingering info, they may want an LOE (letter of explanation).

  2. Scott July 18, 2017 at 6:19 am -

    Our situation:
    Mine/my wife’s combined income: $200K+ (plus small income from owned condo with a renter paying us monthly)
    Credit Scores: both 800+
    Debt: None
    Down Payment: 20% on a $1.1M home (saved)
    Loan Pre-approved: Yes
    Employment: Both full-time, though I’m a contractor (w/ complete tax records/returns from last 5 yrs)
    – – – – – – –
    My concern is when we’re scrutinized more closely (whatever that entails) by the Underwriter at closing.

    Everything looks good, but I do have a little bit of history: Between 2008-2010 I had to do a “debt consolidation” on my credit cards. At the time this was the only way I could get out of credit card debt. All accounts were “settled” or “settled with derogatory marks,” So initially my credit score was probably as low as it could be. Since then, I have rebuilt my credit, financed and paid off a $40K car, never missed any payments on anything, never took on debt, etc. My credit score returned to 800+. So my question is, how likely will my past ‘misadventures’ (ended 2010) impact the underwriter’s decision for our loan?
    Thank you for your time and advice,

    forgot to add – we can show $100K in additional savings/assets.

  3. Colin Robertson June 21, 2017 at 7:58 pm -


    Why do you think it’ll be a problem? Is the income not sufficient? Is there some other issue? Just because the underwriter is asking for more documentation doesn’t mean it’s a bad thing, it just means they need more information to make a sound lending decision.

  4. Zary June 21, 2017 at 6:06 pm -

    Hi Colin….my closing date is set for July 7th today i gave my loan officer and processor some documents they needed w2s check stubs bank statements divorce decree etc… When the processor got to my w2s it was a problem because i filed my 2015 w2 on my 2016 return the numbers didn’t add up so i had to show her my 2016 w2…long story short i had to call the IRS to get my tax transcripts and give them to her…so my question is will my w2/ returns get me denied at closing?

  5. Colin Robertson May 31, 2017 at 11:48 am -


    It’s possible if loan conditions aren’t satisfied, or if something comes up that can’t be resolved.

  6. Albertina Desperot May 30, 2017 at 5:20 pm -


    Will the underwriters deny your loan at closing

  7. Eric Collins November 29, 2016 at 8:36 am -


    My concern is that I received the gift money (I won’t be on the loan), and I then gifted it to my wife in the same week. After doing some research my understanding is that this money needed to be ‘seasoned’ in my account for at least 60 days.

  8. Colin Robertson November 28, 2016 at 7:14 pm -


    If they allow gifts and you can document it what’s the problem?

  9. Eric Collins November 28, 2016 at 5:00 pm -


    Thanks for the quick reply we’re a little stressed out right now. They allow gifts that are sourced. When the pre-approval gets reopened in February, they want the December and January statements — these bank statements will only contain funds received via our direct deposit from our respective employers. It sounds like they want to see my statements from back in August where I received the gift and essentially gifted it to my wife within a few days.

  10. Colin Robertson November 28, 2016 at 4:14 pm -


    Depends if they use more recent bank statements or the old ones and if so, will they allow gifts as long as they are sourced and paper trailed?

  11. Eric Collins November 28, 2016 at 2:03 pm -

    Hi Colin

    My wife was pre-approved in late August for a loan for a new construction loan (I will not be on the loan). After she was pre-approved I received a gift from a friend and I gave it to my wife to use as the initial down payment (9k) – basically a gift to her. At the time I did not realize that these funds would need to become ‘seasoned’ in my account first, before I made the deposit/gift to her account. Since the home is new construction her pre-approval will go in to a hibernation until 60 days before close. At the 60 day mark, the lender will reopen the pre-approval, rerun the credit, and verify assets. When the re-open the pre-approval in February, she will have more than enough money for all of the down (including the 9k I gave her), as well as closing costs and reserves. Also, her debt to income is extremely low, and her credit is around 740. She also has stable employment at the same location for 17 years. Could the gift money be an issues when the underwriter looks at it again? He has already requested my bank statement from that time period.

    Thank you, Eric

  12. Colin Robertson November 3, 2016 at 11:59 am -


    Not sure why a bank would give you more experience versus working for an independent lender or a broker. In fact, you might learn more with the latter because they often work with more loan programs, fewer automated systems, etc. The MLO vs. underwriter positions are quite different, with the former being a sales job and the latter an operations job. Generally, you can get the MLO with no prior experience but underwriters tend to need degrees and some experience, or start as junior UWs. Good luck!

  13. Felipe Quintero November 3, 2016 at 8:04 am -

    Hi Colin,

    I’m a recent college grad with no prior work experience working on getting my MLO license I just need to take the national exam and I get licensed. But I hear it would be a better option for me to work for a bank to get experience. I live in South Florida, what do you suggest I do ? I find the underwriting more interesting but how do I get my foot in the door with no experience what so ever and a BA degree in Accounting.

    Thanks, Felipe

  14. Colin Robertson September 28, 2016 at 2:22 pm -


    You’ll likely need to prove that the income you’re currently earning is stable, ongoing, and can be documented. May want to discuss with your loan officer to ensure there aren’t any hiccups.

  15. Donna Clark September 27, 2016 at 2:46 pm -

    I’m have been conditionally approved for a refi. I have credit over 700 and more than enough equity. My concern is that I am part W2, part I-9 and part cash income, as I nanny. One of my w-2 incomes ended in July. It was a nanny position. I have more than enough cash income from other nanny families, to make up for that. Will they take VOI from them? I have been in childcare for over 20 years so its not a new employment field.

  16. Colin Robertson September 22, 2016 at 8:51 am -


    Not sure Joe, but if you’re worried about something if they do call you might want to be prepared to explain it.

  17. Joe September 21, 2016 at 1:53 pm -

    Underwriter wants college transcripts to verify former part-time work status. If I provide this item, are they really going to call my school and verify if I provide official transcripts?

  18. Colin Robertson August 15, 2016 at 11:46 am -


    I don’t know what an account assistant is…so it’s hard for me to offer an opinion, but hopefully my description of an underwriter will give you some idea of what the job entails.

  19. Sheera August 10, 2016 at 3:30 am -

    Hi Colin,

    I have some conflict. I want you to give your opinion. I’m a fresh graduate that have degree in finance. Recently, I’ve got an offer to work as account assistant. I’ve accept it. But, now I have got an offer from a company that offered me as an underwriter. Do you think I should accept it or not? Thankyou.

  20. Donneshia July 25, 2016 at 11:08 pm -

    Hi Colin,

    I actually have a question about becoming an underwriter. I just started with my research but this is a career I am highly interested in and would like to speak with someone to get more information in terms of education, training, certification, etc. I have a degree in Accounting, could you tell me what steps I can take for this career.

    Donneshia McCants

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