Mortgage Underwriting: Understand the Process Fast

Mortgage underwriting is the process where a lender verifies your finances, employment and the property to decide if you qualify for a loan. Underwriting typically takes 1-3 weeks and results in one of three outcomes: approved, conditionally approved (most common) or denied. The underwriter reviews your credit, income, assets, debt-to-income ratio and the property appraisal before making a decision.

What Is Mortgage Underwriting?

Underwriting is the lender’s risk assessment process. The underwriter’s job is to answer one question: Is this loan likely to be repaid?

The Underwriter’s Role

The underwriter reviews your complete file and verifies:

You are who you say you are
Your income is real and stable
You have the funds to close
Your credit history shows responsible borrowing
The property is worth the loan amount
You meet all program requirements

Automated vs Manual Underwriting

Automated Underwriting (AUS):

Computer algorithm makes initial decision
Fast—results in minutes
Used for most conventional and FHA loans
Fannie Mae uses Desktop Underwriter (DU)
Freddie Mac uses Loan Prospector (LP)

Manual Underwriting:

Human underwriter reviews entire file
Required when AUS can’t approve
Common for unique situations
Takes longer but more flexible
Required for some borrowers with credit issues

What Underwriters Review

Credit Analysis

Credit report review:

Payment history (35% of score)
Credit utilization (30% of score)
Length of credit history (15% of score)
Credit mix (10% of score)
New credit inquiries (10% of score)

Red flags underwriters look for:

Recent late payments
Collections and charge-offs
bankruptcy or foreclosure
High credit utilization
Too many recent inquiries
Patterns of missed payments

Income Verification

What they verify:

Employment is current and stable
Income matches what you stated
Income is likely to continue

How they verify:

Call your employer (Verification of Employment)
Review pay stubs for consistency
Compare W-2s to tax returns
Verify self-employment income with tax returns
Calculate variable income (overtime, bonus, commission)

Common income issues:

Job change during process
Declining income trend
Gaps in employment
Income doesn’t match documents

Asset Verification

What they verify:

You have funds for down payment
You have funds for closing costs
You have reserves if required
Source of funds is acceptable

How they verify:

Review bank statements (all pages)
Trace large deposits
Verify gift funds with letters and transfers
Confirm investment account values

Common asset issues:

Large unexplained deposits
Insufficient funds
Missing bank statement pages
Unacceptable sources (cash, loans)

Property Review

Appraisal review:

Value supports purchase price
Property meets loan program requirements
No red flags in condition
Comparable sales support value

Title review:

Clear ownership history
No liens or encumbrances
No boundary disputes
Marketable title

The Underwriting Timeline

Typical Process

Stage	Timeline
Loan submitted to underwriting	Day 1
Initial review	Days 1-3
Conditions issued	Day 3-5
Conditions submitted	Depends on borrower
Conditions reviewed	Days 1-3 after submission
Clear to close	1-3 weeks total

What Affects Timeline

Faster underwriting:

Clean, complete file
Quick response to conditions
Simple financial situation
No appraisal issues
Automated approval

Slower underwriting:

Missing documents
Complex income (self-employed)
Credit issues requiring explanation
Appraisal problems
Manual underwriting required

Underwriting Outcomes

Approved

Rare on first pass. Means no conditions—ready to close. Most loans have at least minor conditions.

Conditionally Approved

Most common outcome. Approval pending satisfaction of specific conditions.

Prior to documents (PTD): Must be cleared before closing docs are prepared

Prior to funding (PTF): Must be cleared before loan funds

Suspended

Underwriter needs more information before making a decision. Common when key documents are missing.

Denied

Loan doesn’t meet requirements. Underwriter provides reason(s) for denial.

Common Underwriting Conditions

Income Conditions

Condition	What’s Needed
Updated pay stub	Most recent 30 days
VOE	Employer verification
Letter of explanation	Explain job gap or change
Additional tax return pages	Missing schedules
CPA letter	Verify self-employment

Asset Conditions

Condition	What’s Needed
Source large deposit	Explanation + documentation
Updated bank statement	Most recent statement
Gift letter	Signed letter from donor
Donor bank statement	Prove donor has funds
Missing pages	Complete statement

Credit Conditions

Condition	What’s Needed
Letter of explanation	Explain late payments, collections
Pay off collection	Proof of payment
Pay down credit card	Lower utilization
Verification of rent	Canceled checks or landlord letter

Property Conditions

Condition	What’s Needed
Appraisal repairs	Proof repairs completed
Termite inspection	Clear inspection report
HOA questionnaire	Completed by HOA
Survey	Property survey
Flood insurance	Policy if in flood zone

How to Speed Up Underwriting

Before Applying

Gather documents early: Have everything ready before you apply

Check your credit: Fix errors and pay down balances

Avoid changes: No job changes, large purchases or new credit

Document everything: Keep records of all financial transactions

During the Process

Respond immediately: Answer condition requests same day if possible

Provide complete documents: Don’t send partial statements or unsigned forms

Stay available: Check email and phone frequently

Don’t make changes: No job changes, big purchases or money movements

What to Avoid

Don’t change jobs: New employment requires verification and may delay or derail approval

Don’t make large purchases: New debt affects your DTI

Don’t move money around: Unexplained transfers create conditions

Don’t open or close credit accounts: Changes to credit profile raise questions

Don’t make large cash deposits: Cash is hard to document

Underwriting Red Flags

Employment Concerns

Changing jobs during process
Declining income
Employment gaps
Commission or bonus income without history
Self-employment less than 2 years

Credit Concerns

Recent late payments
High credit utilization
Collections or judgments
Recent bankruptcy or foreclosure
Too many inquiries

Asset Concerns

Large undocumented deposits
Insufficient funds
Recently opened accounts
Pattern of overdrafts
Unacceptable gift sources

Property Concerns

Appraisal below purchase price
Condition issues requiring repair
Title problems
Flood zone location
Non-warrantable condo

What Happens After Underwriting Approval

Clear to Close (CTC)

Once all conditions are satisfied:

Underwriter issues “Clear to Close”
Closing documents are prepared
You receive closing disclosure
3-day waiting period (minimum)
Schedule closing appointment
Sign documents and fund loan

Final Verifications

Even after CTC, lenders may:

Re-verify employment (day of closing or day before)
Re-pull credit (if significant time has passed)
Confirm no changes to financial situation

Important: Don’t do anything to change your financial picture until after closing.

When Underwriting Goes Wrong

Denial Reasons

Common reasons for denial:

Insufficient income
Too much debt (DTI too high)
Credit issues
Inadequate assets
Employment problems
Property issues

Your Options After Denial

Request explanation: Lender must provide reason in writing

Address the issue: Fix what caused the denial if possible

Try another lender: Different lenders have different guidelines

Consider different loan program: FHA may approve what conventional denied

Wait and improve: Sometimes time and improvement is the answer

Frequently Asked Questions

How long does mortgage underwriting take?

Typically 1-3 weeks from submission to clear to close. Simple files may take 1 week. Complex files with conditions can take 3+ weeks.

What happens during underwriting?

The underwriter reviews your credit, income, assets and the property. They verify everything matches program requirements and issue conditions if anything needs clarification or documentation.

Can you be denied after underwriting approval?

Yes, if something changes. Job loss, new debt, changed financial situation or issues discovered later can result in denial even after initial approval.

What does “conditionally approved” mean?

You’re approved pending certain conditions being met. Most loans are conditionally approved. Once you satisfy the conditions, you’ll receive final approval (clear to close).

How do I know if my loan is approved?

Your loan officer will notify you when you receive clear to close. You’ll also receive the Closing Disclosure, which you must review before closing.

Should I contact the underwriter directly?

No. Communication goes through your loan officer. They’ll relay questions and answers between you and underwriting. Direct contact typically isn’t allowed.

Learn what happens during mortgage underwriting.