How Underwriting Mortgages Works

All you need to know about mortgage underwriting

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What is mortgage underwriting, and how does it work?

When you make a mortgage application, it is referred to an underwriter. UK mortgages are risk assessed, and this is the part of the process where the information you supply is scrutinised to ensure you can realistically make your mortgage repayments. All the details and figures you provide are validated to paint an accurate picture of your complete financial situation.

Even in the earliest stages, mortgage brokers and lenders include an affordability assessment to calculate how much they think you can afford to pay and the mortgage products you’ll be entitled to apply for.

When you’ve picked your preferred option, the mortgage underwriting checks confirm that everything is as you say, and you represent the acceptable risk level where your lender is happy to proceed—and with that, finally, you receive your mortgage approval.

Who does the mortgage underwriter work for?

Each mortgage lender has strict rules to safeguard such large sums of money. The risk they take on each borrower is often worth hundreds of thousands of pounds, so they have to ensure that their investment is safe and sensible. Employing a professional to carry out the necessary checks is a must, so qualifying each mortgage with underwriters considerably reduces the risk level.

To verify the level of risk as part of the mortgage application process, an underwriter thoroughly checks the details, authenticating documents and ensuring your application is genuine.

Do all mortgages go to underwriters?

Not all mortgage lenders use underwriters. Some lenders underwrite their own mortgages, and others only use underwriters in situations that require specialist experience and knowledge (e.g. high LTV rates, complex incomes, bad credit mortgages, etc.).

By trusting the fine details and decisions to the underwriters, mortgage risk is reduced for lenders while ensuring that the customer is in a position to make the repayments.

The mortgage underwriting process (UK)

1. An initial soft search and credit check filter the application for an Agreement in Principle

Considering the critical factors of your application, the underwriter determines an internal score that must meet the minimum level to proceed.

This part of the process verifies your identification and essential financial information, including age, mortgage term, employment status, income, outstanding debts, credit score, etc.

With a qualifying score, applicants will receive a Mortgage Agreement in Principle (AIP).

The AIP merely confirms that you’ve made it through the first step, not that you’re entitled to the money.

2. Property valuation

With your AIP, you can start looking at properties that fit your price range. Once you’ve made your choice, the underwriter will evaluate the property to make sure it’s worth what the sellers say, is in good condition, and that if anything goes wrong with your repayment schedule, the lender will be able to recoup their losses.

3. Underwriting

If everything has gone well, the mortgage underwriter then performs an in-depth review of the loan and your finances. They might ask for supporting information, documents, and proof of elements you haven’t yet provided.

They’ll require official documents to back up all areas of your application while carrying out their most detailed checks.

  • Credit checks
  • Bank statements
  • Proof of income
  • Proof of deposit
  • Financial history
  • Property details

Considering a complete picture of your financial situation allows them to assess your position, attitude to money, and any behaviour that could reveal a cause for concern.

What do underwriting checks include?

Policy rules: Necessary criteria such as age, legal status, maximum loan amounts, LTVs, etc.

Credit reporting: Each lender puts together its own model for how you manage credit. Soft checks will access your credit score, but underwriting creates a situation-specific number for your application.

Affordability assessment: This model tests your ability to repay the monthly payments. This is calculated using your income and all your outgoings. Offers usually work on around 4 x your annual income; however, your financial situation and behaviour will be reflected in how much your provider is willing to lend.

Fraud checks: Although this sounds a little extreme, there are plenty of ways borrowers try to trick lenders. Underwriters may ask you to clarify where your deposit has come from and prove that any gifted deposits come from legitimate, genuine resources.

Property valuation: Despite each buyer’s best hopes, their chosen property doesn’t always live up to its description. Underwriters check its construction, age, build quality, and any defects it reveals or to the surrounding area before approving it for a mortgage.

How long does the mortgage underwriting process take to complete?

Most applications are subject to both automated underwriting and manual underwriting.

Many soft checks are automated to save time and money, speeding up the process and keeping costs down.

However, regarding the fine details, the underwriter manually checks the authenticity of documents and the validity of each required element.

With that in mind, each stage can take a week or two to complete or a little longer during the busiest periods in the property market.

What can I do if a mortgage underwriter rejects my application?

There are many reasons a mortgage underwriter might reject your application. From something as simple as missing paperwork to the amount you’ve asked to borrow is too great a risk for your cash flow.

Another common reason is that your situation has changed since the initial application. For example, if you lose your job or take out additional loans that, in turn, affects your credit history, the underwriter will need to recalculate your figures to ensure you can still meet your obligations.

If your application gets rejected, don’t panic. Your mortgage approval could be a few small changes away.

Putting any issues straight is often a simple step causing only the slightest hiccup in proceedings. For example, missing documentation is easily located and supplied; credit scores can be improved by paying off existing debts and reducing monthly subscriptions, or taking a little longer to save a slightly bigger deposit is always an option.

However, every time you apply for a mortgage, it’s recorded on your credit report. Multiple applications over a short period affect your credit score, so it’s worth building the best chance of being accepted and not applying for more than one product at a time.

CLS – the expert mortgage broker

CLS's team of expert advisors are ready with all the mortgage advice you need. We're here to explain everything you need to know about your mortgage application, and about any problems you're having with the underwriting stage, or anything else.

If you're struggling for mortgage approval from the high street banks or other lenders, why not give us a try? We'll guide you through all the stages and the paperwork, ensuring your application passes cleanly through the underwriting process. You'll be glad of the benefits having an exclusive mortgage expert on your side brings.

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Gemma May

Operations Director

Gemma May

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