A mortgage underwriter evaluates risk and decides if a loan meets lender, investor, and regulatory guidelines. The underwriter will verify the file’s accuracy—credit, income, assets, debts, employment and calculate the debt-ratios and reserve requirements as set forth by the guidelines. In addition, the undewriter will reveiw the appraisal (collateral), title policy, and homeowner's insurance. Using Automated Underwriting Systems (AUS) findings and/or manual review, they assess red flags (large deposits, gaps, credit events), request conditions, and document the ability to repay and compliance.

After the initial undwerite, the outcome of the mortgage application would be approved, conditionally approved, or denial. If approved, the file moves to the closing department and issued a "clear to close". If conditionally approved, the mortgage has been approved subject to satisfying the conditions set forth by the underwriter. These conditions are typically letters of explanation regarding unusual withdrawals or deposits, most recent pay stubs, updated asset documentation, or clarification of items on an appraisal.

Underwriters don’t set rates or terms; they ensure the loan is saleable to the agency who is going to purchase the loan and/or insure or guaranty the loan.

Underwriters typically re-pull credit 2-4 days before closing to verify any new credit has not been established. This is why your loan officer advises not to apply for ANY new credit while a mortgage application is in process. If you establish new credit, the borrower's file will have to go back through underwriting to ensure the debt ratios are within the approval guidelines. This can delay a closing by 7-14 days.