First understand that there are two underwriters, the automated one and the human one. All conventional and government loan files are first submitted through a software package that we generically refer to as an Automated Underwriting System or AUS for short. The two most common systems are Fannie Mae’s Loan Prospector and Freddie Mac’s Desktop Underwriter.
These systems review the info the loan officer input to the application, along with the credit report, and render a decision that the applicate does, or does not, meet the lender’s guidelines. Keep in mind the old saying, “garbage in, garbage out”. If the information the Loan Officer input into the system is incorrect, your approval may be no good.
Enter the human underwriter. There job is to first review the info input against the documentation provided. If the human underwriter finds that the info is incorrect (such as income) they will correct the info and request an updated decision from the AUS. This can result in the file losing it’s approval. So the loan isn’t really approved until the human underwriter says it’s approved.
Underwriters are sort of the parents in a mortgage company. It’s the loan officer’s job to ask for approval of their loan request. It’s an underwriter’s job to review the application and make sure it fits the investor’s requirements. Sometimes that means they have to be the bad guy and say no. Human underwriters can over ride the AUS approval or denial but they would need a very good reason to do so. They are more likely to turn down an approved loan than approve a loan denied in the AUS system but I’ve seen it done.
Before they say no, a good underwriter will explore possible options with the MLO to see if they can approve the application. They will make sure they aren’t missing a piece of important documentation. But ultimately they need to make sure the file meets guidelines and makes sense.
Underwriters go through lots of training to do their jobs. At the start of their careers they are given simple files such as conventional rate and term refinances. As they get more experience they start underwriting more complex cash out refi’s and purchases. Then they can take additional training and start to underwrite FHA, VA and USDA files. Only the most experienced underwriters are allowed to underwrite construction loans.
As an applicant, you most likely will never speak to your underwriter. Some companies don’t even allow loan officers to speak to them. If you have an issue with how your loan was underwritten you will need to speak to your loan officer and put together a letter to the underwriter. You will need documentation to back up your letter.
Always keep in mind, the underwriter has a job to do and that is to protect the lender.
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