What does underwriting mean?


At a very young age we learn very quickly there is always someone in charge — someone watching us to make sure we are acting as we should. For most of us, we all have that teacher in mind that never let anything slide. Nothing less than perfection was ever accepted.

Mrs. Brock at Webster Elementary in the first grade comes to my mind. She was very tough on me. Now, I can’t remember the details, but she retired mid-year. As luck would have it there was another retired teacher that finished out the year. Her name was Mrs. Mae Fenner, who also happened to be my grandmother. My situation went from bad to worse.

As I grew older, there was always someone over me making sure my actions were acceptable. As the saying goes, if you think your teacher is tough, wait until you meet your boss. I don’t think it matters how far I go in life, there is always someone in charge. Someone that’s higher up the food chain than me.

In years past, applying for a loan was the same process regardless of what bank you went too. There was a guy wearing a suit behind an enormous desk asking you questions. This guy had the authority to say yes or no. Your loan approval was based on you, your family and their reputation. If your father was upstanding, it was assumed that you were as well. The process then changed to a board meeting. The loan officer would take your loan to a weekly board meeting for approval. Underwriting was the next process, but it hasn’t been around for very long. Yes, like all areas of our lives, things have changed.

Anyone that has bought a home in the last few years has heard the phrase, “The loan is in underwriting.” As a realtor, we hear that phrase a lot. What exactly does that mean? Is it just another phrase that means “we’re working on it?” Is it just what we’re told before we get the dreaded, “We can’t approve your loan?”

Underwriting is used by lenders for mortgages. Underwriters can be employed by the bank or they may be a separate company altogether. In a nutshell, it is their job to reduce the risk for the lender. They also have all the authority to deny or to approve the loan. When it comes down to it, the underwriter is in charge.

The loan officer will submit the documentation to the underwriter. The job of the underwriter is to verify all parts of the loan. This includes income, job history, credit, appraisal, title search, and a host of others. They check and double-check each part of the loan for the lender, thus reducing the risk factor. From the time you submit your application, to the moment you’re signing your papers at the closing, underwriting is involved. You will never see them, nor speak with them, but it’s up to them if you receive your loan. Each part of the loan process takes time for them to review.

Depending on the lender, the process can take 30 to 45 days to complete from start to finish. From a buyer’s standpoint, it can be painful, frustrating, and just downright difficult to bear. In the end, you have a new home. Is it worth it, you may ask? I would sure hope so.

Underwriting is very complex at times and can be hard to explain to someone. Once again, someone else is in charge. My best example is from a very popular Christmas movie. We all know it well — “Christmas Vacation”. Clark spends hours and had so much trouble getting the lights working on his home. He finally got them going and the family was looking at the majestic display of lights. As he goes down the line and hears how fantastic it looks, he gets to his father-in-law, Art. Art told him, “The little lights aren’t twinkling Clark.”

That’s what underwriting is. You can have a perfect loan and have all the documents in place, and without a doubt, there’s one little thing not quite right. The underwriter is ultimately in charge.

Randy Butler is a lifelong resident of Highland County and a licensed real estate agent for Classic Real Estate in Hillsboro.

Randy Butler Contributing columnist
https://www.timesgazette.com/wp-content/uploads/sites/33/2020/03/web1_Butler-Randy-new-mug.jpgRandy Butler Contributing columnist

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