Mortgage Underwriting in the UK

Mortgage underwriting is the part of the mortgage application process when your lender conducts all the financial checks on you and on the property you want to buy to decide if you are an acceptable risk when compared to their lending policy.

This article explains the purpose and process of mortgage underwriting and will cover the following points:

What does a mortgage underwriter do?

The mortgage underwriting process is managed by an experienced lending assessor to carefully and thoroughly review the level of risk the lender would be taking in offering you a mortgage. The underwriter will scrutinise your mortgage application, looking at all the information you provided about your income, expenses, the amount you want to borrow and the value of the property you want to purchase.

Do all mortgages go for underwriting?

Not all of them are done manually. Whilst some mortgages do not go to an actual underwriter and are approved automatically by computer, the more complex your circumstances, the higher the chance of having your mortgage application referred for manual underwriting.

Information underwriters look for

The assessment made by mortgage underwriters may vary from lender to lender but the following areas are commonly reviewed.

1. Do you meet the lending criteria?

Every lender will have a different policy about who they will lend to depending on your age, legal status, employment status, tax status, the amount of deposit you have and many other requirements.

2. Creditworthiness

The mortgage underwriter will assess your previous credit history against their own lender-specific credit scoring. Applicants are unlikely to know how different lenders calculate credit scores so it’s important to regularly review your credit score with the main providers (Experian, Equifax and Transunion) and keep your score as high as possible.

3. Affordability

Your ability to make repayments will be determined by the mortgage underwriter taking into account your income and monthly expenses. Mortgage loan amounts are usually calculated using an income multiplier but there may also be other specific affordability criteria that the lender requires. As part of this affordability check, the Financial Conduct Authority requires underwriters to assess whether mortgage repayments would remain affordable for a borrower in the first five years of the term if interest rates were to rise by 3%. This is known as the affordability stress test.

4. The Property

Mortgage underwriting process includes checking that the property you want to buy is in good condition and is worth what you have offered to pay for it. Lenders will be reluctant to offer mortgages on properties that are defective, are not constructed according to building regulations or simply aren’t worth the price you have agreed with the vendor.

5. Anti-fraud and anti-money laundering

The mortgage underwriter will need to understand where you sourced the funds for your deposit so they will look for evidence on your bank account statements. Large deposits which come from an unclear source is likely to be a red flag for a mortgage underwriter.

How long does the underwriting process take?

Whilst there’s no definitive period, it generally takes around 4-7 working days. If the circumstances are more complex, the process could take longer.

You can help to minimise the time this takes by ensuring that you complete every box on the application form and provide all the necessary documentation with the application.

What is a mortgage application referral?

Sometimes a mortgage underwriter may be unable to make a decision on your application and will refer your case to a more senior underwriter. Some of the circumstances under which your mortgage application may be referred include:

What happens if your mortgage application is declined

The mortgage application may be declined for a range of reasons such as poor credit history, lack of affordability, insufficient deposit, low property valuation, too much debt and too many other recent mortgage applications. Alternatively, it could simply be that the lender doesn’t make loans to people in your situation. e.g. self-employed or it could even be an error, so it’s always worth following up.

Try to find out why your application was rejected so that you can work on fixing the issues before you make any subsequent applications to the same or other lenders. You can increase your chances of a successful application by working with a specialist mortgage broker who can identify the lender that is best suited to your situation.

You may need to make some changes to your finances before you re-apply, such as paying off a debt, setting up direct debits so you don’t accidentally miss payments or consolidating various debts into one payment that’s lower and at a better interest rate. Finally, you may also need to reassess your aspirations and consider buying a smaller home that requires a lower deposit amount and monthly repayments.

To find out what the best course of action is and boost your chances of salvaging your plans, speak to a mortgage broker – see the next section to find out how to choose the right one.

How a mortgage broker can help

Mortgage brokers can help you to identify the right mortgage lender for you, boost your chances of passing the underwriting assessment and help you get your application back on track if you’ve failed them.

Using a mortgage broker can shortcut the application process for you, saving you time, money and frustration. We can put you in contact with our large network of fully qualified and vetted brokers to ease the mortgage application process for you. By using our free broker-matching service, you can rest assured that you’ll be paired with a mortgage advisor who has the exact knowledge and expertise you need.

Call us on 0808 189 0463 or make an enquiry to set up a free, no-obligation chat about your mortgage needs.