Underwriting Explained

If you’ve ever lent something to a friend, whether it was a hundred dollars or your copy of Harry Potter and the Sorcerer’s Stone, you know there’s always the risk that you won’t get it back.

It’s not very different for lenders. Before a bank or other financial institution decides to lend you money to buy a house, they need to figure out if you’re good for the loan.

Lenders assess their risk by analyzing every aspect of your financial health. This process is called underwriting. Throughout three to eight weeks, someone in the underwriting department will take a deep dive into your finances by examining your bank statements, tax returns, pay stubs, proof of sources of income, and details on long-term debts like car or student loans. They also will comb through withdrawals, cash reserves, digital wallet transactions and gift deposits.

All loan applications go through underwriting, and the process is typically the same for everyone. It can be nerve-wracking when underwriters ask for more details about your financial transactions, but it’s not personal.

If the underwriter peppers you with questions, do provide honest answers as quickly and as accurately as possible no matter how tedious it might seem. It’s just as important to avoid doing anything that could damage your financial health. So:

• Do not open any credit cards.
• Do not quit your job or change jobs.
• Do not spend the money you’ve saved for your deposit or closing costs.
• Do not cosign a loan.
• Do not fall behind on any debt repayments.
• Do not buy a new vehicle.
• Do not make any big deposits without checking with your loan officer first.
• Do not change banks.
• Do not buy new furniture for your future house.

The good news is that underwriting doesn’t last forever. Once you meet the lender’s requirements, and with some patience, you’ll be on your way to the closing table. And, INHP will be with you every step of the way.