There are several people and multiple steps involved in helping you obtain a mortgage for your new home. Your loan officer will be responsible for collecting all of the relevant information about your income, credit history, debt ratios, and savings before packaging your application. Once complete, your application will then be reviewed by the underwriter, who will examine each component of your application.
An underwriter determines whether you qualify for a loan and how much the lender will loan to you. He or she will ensure that your information meets all of the particular loan guidelines, safeguarding lenders so that they only loan to credit-worthy clients who will repay them. Underwriters also verify that all of the necessary tax, title, insurance, and other documentation is in place to prepare for closing.
In-house underwriting means that the loan officer and the underwriter work together for the same company under the same roof. Their close physical proximity makes the process go faster and more smoothly. Here are some of the reasons why you may want to look for lenders with in-house underwriting when you apply for your mortgage.
When Does Underwriting Happen?
The underwriting process begins as soon as your application is completed by the loan officer and is sent to the underwriter. This will usually happen after you’ve been pre-approved and agreed to take the loan that you’ve been pre-approved for. This is the part of the process where information is reviewed, and a final decision on the outcome is determined.
There are several methods of underwriting. Traditionally, a loan officer engages in manual underwriting. In this method, all of the applicant’s information is entered into the system and then sent out to the underwriter for review.
With this impersonal arrangement, an underwriter may wind up reviewing an application from the other side of the country. If that’s the case, there may not be an opportunity to present any additional information that may help the applicant’s case. If there is, it may take several days for the loan officer to reach out and respond to the underwriter. Consequently, it can take up to 60 days to manually underwrite a transaction, which is bad news for buyers in a competitive seller’s market.
To increase efficiency, some mortgage underwriting is automated. Once the loan officer enters all of the application information, it is processed by a computer program. The program runs that data against a formula to assess the transaction risks before issuing an approval or denial.
While this process is much faster, automated underwriting often denies mortgages to plenty of well-qualified buyers. Affluent retirees, self-employed or commissioned salespeople, for example, are repeatedly rejected by automated underwriting processes because their income situation is irregular or inconsistent with the overall picture. Since that falls outside of normal good credit parameters, the computer doesn’t approve the loan.
Outside of the automated process, these are situations where the loan officer may require more information to determine an applicant’s credit risk. With that additional information, the mortgage underwriter may make a more thorough assessment that might result in an approval instead.
What Is In-House Underwriting?
In-house underwriting is essentially the Goldilocks option for mortgage underwriting. Lenders with in-house underwriters can have loan officers collect your information and complete your application before shipping it off to an underwriter down the hall.
Having the loan officer and mortgage underwriter in the same building can be a great way to expedite the process and make it easier for homebuyers. If some issues or complications merit further review or information, it’s a simple thing to get it to your co-worker and move the mortgage underwriting process along quickly.
Since they work together and have the opportunity to meet regularly, the loan officer should have a pretty good read on what works best, saving you time when you first apply. Additionally, loan officers can explain any nuances or communicate with their clients to clear things up for the underwriter. Similarly, the underwriter can quickly reach out to the loan officer if something is missing or needs further attention.
What Are The Benefits Of In-house Underwriting?
- Time. In-house underwriting can save quite a bit of time. Working together under the same roof makes the entire mortgage underwriting process much more efficient. Instead of handing your file off to some faceless underwriter, your loan officer can stay on top of your application. After working with the same underwriter, the loan officer will have a good idea of what to look for and the best way to present all information for the applicant’s best chance of success.
Once the underwriter has received the application information, being in the same office makes it easy to get in touch with the loan officer in case there are any issues or missing pieces that need to be clarified, so communication is smooth and fast. You’ll often have a decision within a few days. In contrast, that can be how long it takes for an outside underwriter to communicate that they require further documentation, which would delay the process even further.
- Communication. In-house underwriting makes it easier to connect all of the involved parties for faster resolution. It’s much easier for the lender, realtor, and buyer to stay in the loop when an outside underwriter is not involved. This makes the process more seamless, convenient, and stress-free. If there are issues, the loan officer and underwriter are familiar with ways that they can work together to solve problems and work out any kinks quickly.
- Better service. The main downside to automated underwriting is that it works with this idea of acceptable risk, limiting the factors that qualify you for a loan to a particular sweet spot. Suppose your income is low, but you have significant savings. In that case, you might not make the computer’s cut and be denied for a mortgage that you can comfortably afford. People can look beyond the initial inputs to see the whole story. In-house underwriting enables lenders to see you as a real person with a unique situation. One of the most significant advantages of in-house underwriting is that your loan will get the attention it deserves.
- Quicker closing. This is just another way that in-house underwriting saves time. In-house underwriters are often able to pre-approve loans for their lenders so that you’ll have a pretty good idea of what you have to work with when it comes to your mortgage. When it comes for them to formally review your application after you’ve agreed to take the loan, they are already familiar with it, saving you time. All told, if you choose a lender with in-house underwriting, you can close in a matter of days instead of weeks or months.
Should You Outsource Underwriting?
In-house financing is great. If it’s a viable option for you and your current situation, it is well worth pursuing. It makes the entire mortgage process easier to manage, which saves you time and frustration.
It’s imperative that you choose the right loan officer. They’ll liaise on your behalf throughout the transaction, so make sure you find someone you can develop a good working relationship with. They also have a lot of influence on how quickly your file is sent to the underwriter and how quickly you get to close.
Choosing In-House Underwriting
Lenders with in-house underwriting are an attractive option for new home buyers for several reasons. Having both your loan officer and mortgage underwriter working together for the same lender is incredibly efficient compared to lenders who send their applications to outside underwriters.
If information is missing or some type of solution can be found to approve a mortgage application, it can be quickly resolved with in-house underwriting. You can often close on your mortgage within a few days instead of several weeks or months that it takes to secure approval from an outside underwriter. Contact A and N Mortgage to learn more about how to take advantage of in-house underwriting!
A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.