Mortgage Underwriting

The mortgage process is complex and therefore separated into several distinct parts, one of which is mortgage underwriting. When you submit a mortgage application, it will invariably be subject to underwriting.

So that you can get an understanding of what this actually means, and thereby approach your mortgage application with confidence, we've put together this guide which contains all of the essential details. We'll cover:

• What is mortgage underwriting?
• The mortgage underwriting process
• What documents will you need for underwriting?
• Do all mortgage applications go to underwriters?
• How quickly is a mortgage application underwritten?
• What can cause an underwriter to flag or decline your application?
• What happens if your application is declined?

What is mortgage underwriting?

Mortgage underwriting is an integral process in which a lender evaluates the risk associated with lending you money. The ultimate goal is to ascertain your ability to repay the loan while ensuring that the property you're purchasing serves as a viable security for the loan. Based on this assessment, the lender will make a decision to either approve or decline your application.

The mortgage underwriting process

Each lender follows a unique mortgage underwriting process, and so differences in procedure may exist. However, the mortgage underwriting process will generally involve the following stages.

Soft search

During this phase, your application undergoes a preliminary review to align with the lender's broad criteria. This includes top-view level factors such as age, employment status, and minimum income requirements.

Credit check

The lender will conduct a credit check through one or more of the major credit reference agencies, using statistical modelling to assess the likelihood of potential challenges arising regarding you repaying your mortgage. Given the diverse credit check procedures and risk tolerances among lenders, it is entirely plausible to face a decline from one lender and approval from another. Similarly, if your credit score is low, indicating adverse credit, then there are specialist lenders available so that you can get a product matching your financial situation.

It should be noted that credit checks leave a mark on your report. So, if you want an idea of where you stand financially before applying, then you can use our free credit check tool (£14.99 per month after the free 30-day trial). Using it will help you to spot possible mistakes and instances of fraudulent activity on your record so that you can address any problems as soon as possible. The trial and subscription can be cancelled at any time.

Affordability check

Many lenders employ a dual approach involving an income multiple calculation and an additional affordability model. These assessments evaluate your ability to manage mortgage repayments while maintaining existing financial commitments, including taxes, debts, and childcare costs.

Typically, lenders set income multiples ranging between 4 and 5 times the applicant's annual income, and the Bank of England restricts lenders to advancing no more than 15% of their new mortgage lending above 4.5 times income. This is why most applicants are capped around 4.5x, with higher multiples generally reserved for stronger credit profiles, lower loan-to-value borrowing, or certain professional and high-income schemes. You can read more in our guide to what mortgage you could get on your salary.

Lenders also generally consider interest rate risk as part of this check. Since August 2022, lenders are no longer required to follow the previous Bank of England recommendation to test affordability at 3 percentage points above their standard variable rate, but most still apply some version of their own stress test as part of their responsible lending obligations, checking that you could still manage your repayments if rates were to rise.

What is a debt-to-income ratio?

Alongside your income multiple, many lenders also calculate your debt-to-income (DTI) ratio: your total monthly debt commitments, including the new mortgage payment, divided by your gross monthly income. This gives the lender a clearer picture of how much of your income is already committed elsewhere before your mortgage is even added.

There's no single DTI figure that guarantees approval, since every lender weighs it differently alongside your income multiple and overall affordability assessment. As a general rule, the lower your existing debt relative to your income, the more comfortably you're likely to pass this part of the check, and paying down existing credit card or loan balances before applying can make a genuine difference here.

Property valuation

At times, lenders might categorise some property types as too high-risk for loan offerings. In addition to assessing the property's value, they scrutinise its characteristics, including construction methods, materials used, construction date, and the presence of any defects.

This thorough examination is conducted to ensure the property aligns with their established criteria, with each lender having specific policies concerning the types of properties they are willing to consider.

Fraud and money laundering check

Prior to granting approval for your application, your lender must be satisfied with the accuracy of the information you've supplied and verify the legality and legitimacy of the funds you're using for your mortgage deposit. In cases where there are uncertainties, they may request supporting evidence for particular transactions from your financial records.

What documents will you need for underwriting?

Having your paperwork ready before you apply can genuinely speed up the underwriting process. Most lenders will ask for:

• Proof of identity, such as a passport or driving licence
• Proof of address, usually a recent utility bill or bank statement
• Payslips, typically covering the last three months, or accounts and tax returns if you're self-employed
• Bank statements, usually the last three to six months, showing your income and regular outgoings
• Evidence of your deposit, including where the funds have come from
• Details of any existing debts, credit cards, loans, or other financial commitments
• Proof of any additional income, such as bonuses, benefits, or rental income, if you want it to count towards your application

Missing or incomplete documents are one of the most common causes of delay at this stage, so gathering everything in advance, ideally before you even submit your application, is one of the simplest ways to keep things moving.

Do all mortgage applications go to underwriters?

No, in many cases the underwriting process is automated, and decisions are driven by algorithms. However, specialised situations involving intricate income structures, poor credit histories, or high loan-to-value (LTV) ratios necessitate human judgement, leading to a referral for manual underwriting.

A case referral indicates that its complexity surpasses the capabilities of automated systems, but it doesn't necessarily imply rejection; human underwriters simply take a more nuanced approach, which is sometimes needed. Essentially, entrusting the intricacies and decisions to human underwriters serves to mitigate mortgage risk for lenders while ensuring that borrowers are well-positioned to meet their repayment obligations.

How quickly is a mortgage application underwritten?

Automatic underwriting is a process which often concludes rapidly. Conversely, manual underwriting takes longer, ranging from a few hours to a week. The total duration hinges on factors such as the complexity of your case, the underwriter's experience, and the current workload of the underwriting department.

In some instances, underwriters may seek additional information or documentation, leading to slight delays. You can expedite the process by promptly responding to messages in your inbox, especially those requesting further personal information, and by having the document checklist above ready from the outset.

What can cause an underwriter to flag or decline your application?

The underwriter plays a vital role in evaluating every facet of your application. A decline during the underwriting stage often stems from changes in your circumstances, such as acquiring a new loan or experiencing recent job loss.

Alternatively, the underwriter may uncover aspects in your finances that cause you to be categorised as high-risk, according to their criteria. Common issues underwriters look out for include:

• Undisclosed debts, credit applications, or financial commitments not mentioned on your application
• Large, unexplained deposits into your bank account in the months before applying
• Gaps in employment history, or a recent change of job or income structure
• Inconsistencies between the information on your application and what your documents actually show
• A higher-than-expected debt-to-income ratio once all your commitments are accounted for

This could result from discrepancies in your affordability, deposit, credit rating, or overall financial management. None of these automatically mean a decline, but they are the kinds of details worth getting ahead of before you apply, ideally by explaining anything unusual upfront rather than leaving an underwriter to find it and ask.

What happens if your application is declined?

If your application receives approval, you can proceed with the homebuying process. Your solicitor will collaborate with the seller's solicitor to finalise the contracts and establish a completion date.

In the event of an application decline, your next step should be to understand the reasons behind the decision. Once the issue is identified, there is a good chance it can be remedied. This might involve efforts to enhance your credit score, reduce existing debt, or accumulate a larger deposit. You can then collaborate with a mortgage broker to either renegotiate with the lender or explore the option of submitting a new application.

Get a mortgage broker to guide you through the underwriting process

The success of navigating through the underwriting process or encountering hurdles often lies in having the right specialist by your side. Therefore, when selecting a broker, it is important to find someone whose expertise aligns with your specific needs.

Get Personalised Quote

The Mortgage Genie's expert mortgage brokers carry out an in-depth examination of your application and communicate any special circumstances to the lender. With access to a panel of over 90 lenders through our network, we can look to place your application with a suitable lender and product to give you the best chance of a smooth outcome.

For details on how we can help, be sure to get in touch with us today by calling 0191 580 9890. And why not see how much you could borrow up to right now by using our mortgage calculator?

The above blog has information contained within which was correct at the time of publication but is subject to change.

This information is a guide only and should not be relied on as a recommendation or advice that any particular mortgage is suitable for you. All mortgages are subject to the applicant(s) meeting the eligibility criteria of the specific lender. You should make an appointment to receive mortgage advice which will based on your needs and circumstances.