Important points
Underwriting involves a thorough investigation of the buyer’s financial situation and the property.
The most common causes of underwriting delays are income verification, documentation consistency, and property and ownership issues.
Preparation, clear communication, and quick response are the best ways to protect your clients and finish on time.
Underwriting is often the most stressful stage of the home buying process. Even well-qualified buyers can face delays and surprises if something changes or doesn’t match the documents. Protecting customers during underwriting means anticipating where deals typically get stuck and taking proactive steps to prevent delays that could jeopardize closing.
Here’s what to look out for during underwriting and how proactive guidance can help clients close on time.
What is real estate underwriting?
Real estate underwriting is the process a lender uses to determine whether a buyer qualifies for a mortgage and whether the property meets their financing requirements. During underwriting, the lender conducts a detailed review of both the buyer’s financial profile and the home itself before issuing final loan approval.
Insurance companies typically review:
Income and employment history Assets and cash reserves Credit status and existing debt Property value and condition Title history and insurance coverage
This stage occurs after the buyer signs a contract but before closing. Pre-approval sets expectations early, but underwriting requires all information to be fully verified with updated documentation and final asset numbers.
Predict income and DTI challenges
Income verification at underwriting goes far beyond verifying the buyer’s salary. The underwriter calculates the buyer’s debt-to-income (DTI) ratio, which includes the full monthly home payment, principal, interest, taxes, insurance, and HOA dues.
Even if a buyer is pre-approved, a final insurance estimate, updated property tax numbers, or revised loan terms could cause the DTI to exceed the allowable limit.
Consider variable income
Buyers who receive income from commissions, overtime, bonuses, or multiple jobs face more complex income verification. Lenders typically average two years of variable income, which can reduce the impact of recent high income months.
Encourage customers to qualify using conservative income assumptions and ensure they understand how lenders calculate variable income.
Prepare for self-employment income examination
Self-employed buyers are screened more thoroughly at underwriting. Insurance companies may request income statements, business bank statements, tax returns, and confirmations to confirm income stability and tax compliance.
Setting expectations early on regarding documentation requirements can prevent last-minute surprises.
Prevention strategies:
We help our clients understand exactly how their income will be calculated before they apply. Confirm document requirements with your lender early and gather supporting documentation in advance to reduce follow-up requests.
Eliminate document discrepancies early
Insurers are trained to identify discrepancies in documentation that can indicate errors or potential fraud. Even small discrepancies can result in additional validation requests and slow approvals.
Common issues include mismatched signatures, mismatched dates, misspellings, and unexplained deposits.
Follow the rules for gifting a down payment on a home loan
If a buyer uses gift funds as a down payment, lenders will require clear documentation showing where the money came from and that it does not need to be repaid. Generally, gift funds must be sourced, documented, and transferred according to the lender’s guidelines. A common cause of underwriting delays is missing or incomplete gift documentation.
Prevention strategies:
Verify gift funds early and submit all required gift documentation along with the buyer’s bank statement.
Surface property and ownership risks upfront
Underwriting is not just about evaluating buyers. We also review the property and its title history. Liens, boundary disputes, or title issues can delay closing even if the loan is approved.
Other common red flags include unauthorized additions, easements that affect use, encroachments, HOA issues, and expired ownership transfers.
In some states, older homes can present additional challenges, such as easement concerns and property line discrepancies that often surface during title searches.
Prevent underwriting delays with a clear plan of action
The most effective way to protect your customers during underwriting is to be prepared and transparent.
Submit complete documentation upfront Respond quickly to underwriter requests Avoid financial changes during the mortgage process Work with experienced local professionals
Incorporate buffer time into the transaction timeline. By proactively reviewing these steps with your client before underwriting begins, you can greatly reduce the risk of last-minute delays.
3 tips for the best underwriting experience
A smooth underwriting process usually comes down to a few simple habits. By setting these expectations early, buyers can avoid common mistakes that can delay approval.
Tip #1: Avoid new credits or bulk purchases
Once underwriting begins, buyers should avoid opening new credit cards, taking out loans, and making large purchases. Even planned expenses like furniture, appliances, or a new car can change a buyer’s credit profile or reduce their available equity.
Financial changes may result in additional reviews or delays in approval. After closing, buyers can move forward with their purchase with more confidence.
Tip #2: Respond quickly to lender requests.
It’s common for lenders to request additional documentation during underwriting, such as recent bank statements and an explanation of your income and deposits. The insurance company cannot proceed until these items are considered.
A quick response helps keep processes on schedule and reduces the risk of last-minute delays.
Tip #3: Be open and honest about your finances.
Insurance companies will thoroughly check your income, credit history, and assets. If something unusual happens, such as a missed payment, a large deposit, or an employment gap, it’s best to address it early.
Explanatory text provides helpful context and can prevent unnecessary follow-up questions. For example, payment delays related to medical expenses or timing issues may be viewed more favorably if explained upfront.
Underwriting FAQ
How long does underwriting typically take?
Underwriting typically takes anywhere from a few days to a few weeks, depending on the buyer’s financial situation and how quickly documents are submitted.
Can I be denied a loan during underwriting?
yes. Your loan may be denied if your income, credit, assets, and property issues don’t meet the lender’s guidelines.
Will the buyer need to make any financial changes during underwriting?
No, buyers should avoid making large purchases that could affect their credit score, such as opening a new credit account, changing jobs, or buying a car.
Customer protection during underwriting
Underwriting can seem overwhelming, but it doesn’t have to be a deal breaker. If agents set clear expectations and proactively guide clients, most issues can be addressed before they cause serious delays.
Preparation, consistency, and communication are key to protecting your customers during underwriting. By anticipating common challenges and responding quickly, you can reduce surprises and trade with more confidence.
