Veterans have often heard the term Underwriting when is comes to their purchase or refinance. I think this is a term that is said but really never understood. Perhaps there are misconceptions about this person or process. In reality its both. An underwriter is a person and underwriting is a process.
WHAT IS A VA UNDERWRITER?
An underwriter is a person hired by a Lender (i.e. Wells Fargo, Bank of America) to make sure the loan meets the guidelines of the investor or lender. They really have a tough job because a lot rides on them and they are responsible for bad loans that get approved. VA underwriters will take a file and look over it very carefully and make sure that the originating loan officer packaged the file correctly and make sure nothing is missing or fraudulent. Underwriters must understand VA loan qualifications and mortgage approval based on the Veterans credit history, income, debt, down payment, equity and compensating factors. They issue approvals, clear to closes and denials. They are basically the last line in the home buying or refinancing process. If a Veteran can make it past an underwriter then its usually clear sailing until closing.
What is the VA underwriting process?
So now that we have established who and underwriter is, I want to explain the underwriting process. Once the loan officer has established the value of the home, obtained title work, income documentation and VA loan disclosures, the file is now ready for Underwriting. The loan gets sent to the Underwriting and they will review everything the LO put together. They have most of the analytical tasks. They will follow all the guidelines established by the VA for approval. They looks most at the 3 C’s. Credit, Capacity and Collateral. Credit is obviously the documentation used to determine the Veterans ability to make payments on time. Capacity is the Veterans income, debt, reserves and job time. Does the Veteran have the income capacity to make the payments. Collateral is the home and its value. If you can pass the 3 C’s then an approval will usually be issued.
Once the file comes out of Underwriting there are almost every time conditions. This is still an approval, but the LO will have to meet additional criteria and sometimes provide additional documentation from the Veteran to get a final approval. Once the underwriter is satisfied and all the VA conditions are met then you will be to close your loan. An important thing to remember is that the Underwriter will also issue funding requirements. This means after closing there might be additional work that needs to be done in order to have funds dispersed.
The whole process of Underwriting can take up to 60 days. I have personally seen it take this long because of too much volume and not enough underwriters. Usually though it takes about 1 to 2 weeks. Don’t look at underwriters as someone who doesn’t want your loan, in fact its just the opposite. They want to have the work and approve files. They plan an important role in the VA mortgage industry and will continue to do so.