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What is a Mortgage Underwriter?

By Carol Francois
Updated Mar 02, 2024
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A mortgage underwriter is an insurance professional responsible for evaluating the risk of a mortgage application, from the financial institution perspective. In this job, the mortgage underwriter is responsible for determining the maximum amount of mortgage granted. A mortgage is a long-term loan used to finance the purchase of a home or property.

Underwriting was developed by Lloyd's of London insurance company to mitigate the risk of ship loss for a fee. This type of policy expanded as a way to allow financial companies to have security against financial loss. The process of mortgage underwriting is found in North America, Europe and parts of Asia.

There are three tasks that a mortgage underwriter completes each day: evaluate mortgage applications, determine total mortgage amount, and create risk analysis reports. Mortgage underwriters are employed by the financial or banking institution directly and generally work standard banking hours. Although some mortgage underwriters work from home offices, the vast majority work in an office cubicle.

When the underwriter receives the mortgage application, she looks at the total reported household income, down payment amount, and purchase price of the property. A series of calculations are performed to determine if this request falls within the acceptable range of risk, based on the standard criteria of the lender. A computer software program now performs these calculations.

The total amount of mortgage granted is based on the information provided by the applicant and the guidelines used in the computer program. The mortgage underwriter can adjust this value based on the forecasted value of the property, economic climate and other factors. Banks and financial institutions adjust their levels of acceptable risk all the time, balancing profit opportunities and risk to the institution.

Risk analysis reports are required within every financial institution to determine the total investment value and exposure to financial loss. The review and summary of these reports are used internally to adjust the lending criteria. They are also used to evaluate the job performance of the mortgage underwriters and loan officers.

A career as a mortgage underwriter is fairly stable, as only major shifts in the economy have a negative impact on property sales. Career advancement opportunities are usually limited to management positions in mortgage underwriting. Many people complete additional courses to expand into other types of underwriting, which increases their career options. Underwriting is a numbers-based career and requires both attention to detail and computer skills to be successful.

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Discussion Comments
By mutsy — On Jul 17, 2011

@GreenWeaver - I always wanted to learn how to become a mortgage underwriter. I really love real estate and am good with numbers.

I read that FHA also offers mortgage underwriting training and certification. The mortgage underwriter salary is not bad either.

The average mortgage underwriter job pays about $50,000 a year. This is a far cry from what they used to make, but it is still s good salary.

By GreenWeaver — On Jul 16, 2011

I wanted to say that the mortgage underwriting process also takes the property into consideration too. For example, a few years ago when I was in the market for a vacation home, I was preapproved for a mortgage, and when I found a beachfront property, the bank told me that they could not finance my purchase because of the financials of the building.

The building had a 24% foreclosure rate and had less than 50% owner occupants which were the two conditions when considering offering a loan on a condo.

So the mortgage underwriting process involves a lot more than just the income and credit profile of the borrower. I think that mortgage loan underwriting is probably more stressful now because the banks have much higher standards in terms of lending and a default in a mortgage can really stand out.

I think that this is why many mortgage underwriters will not consider a mortgage without 20% down.

I also wanted to add that a few years ago there were so many foreclosures that the banks had difficulty in appraising a property that a borrower wanted to buy and there were areas that underwriters would not consider because the value of the property could not be determined.

Usually foreclosures were not taken into account when a property was appraised, but that later changed because the majority of the market were filled with foreclosed homes.

By icecream17 — On Jul 16, 2011

I think that the mortgage underwriting process has really changed significantly. I remember during the height of the real estate boom, many of these mortgages were given as no documentation loans meaning that the borrower only had to state their income and not have to prove it in order to get a loan.

This was amazing in light of all that has happened. It is not a surprise that the real estate market as well as many banks collapsed. I imagine that mortgage loan underwriting is a lot stricter today because a lot of borrowers are not able to get mortgage loans.

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