Underwriting is the process through which the lender evaluates whether the borrower, property, and transaction meet the requirements of the requested mortgage.
Credit
Does the applicant demonstrate an acceptable history of managing debt?
Capacity
Does qualifying income support the proposed housing payment and other obligations?
Capital
Does the borrower have verified funds for down payment, closing costs, and any required reserves?
Collateral
Does the property meet valuation and eligibility requirements?
Automated and Human Review
Many mortgages use an automated underwriting system, but documentation still must support the application and a human underwriter may review income, assets, credit, appraisal, contract, and other conditions.
Conditions
An underwriting condition is an item that must be satisfied before final approval. Conditions are common and do not automatically mean something is wrong.
Clear to Close
Clear to close generally means required underwriting has been completed and the loan can proceed toward closing, subject to final closing requirements.