The mortgage loan process involves many people. Within the mortgage company itself, there are three main people involved in the process: the loan officer, the loan processor and the loan underwriter. Each performs a specific job. Ultimately, the loan file ends up on the desk of the mortgage loan underwriter, who makes the final loan approval decision.
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The loan officer meets with the client, takes the application, obtains the credit report and gets any required documentation from the customer, including pay stubs, bank statements and the like. He also runs the loan through the automated underwriting systems, such as DU (desktop underwriter) for pre-approval. After all of the supporting documentation is received, and the application is completed and signed, the file goes to the loan processor. She orders the appraisal, title search, income verification from the employer, asset verification, credit report updates and any other verification information. She then compiles all of the information for the loan into a complete file and sends it to the underwriter.
Once a file is complete and presented to the underwriter, he looks it over and makes sure it is complete. If the loan is preapproved by an automated underwriter, he checks to make sure that all of the documentation in the file matches the figures and information fed into the system that led to the approval. If everything matches up, he signs off on the loan and sends it for funding.
If a file is not preapproved in an automated system, it is called a "manual underwrite" file. Some loan programs do not allow for manual underwrites, but many loan programs that geared toward first time and non-conventional home buyers, such as Federal Housing Administration, do. This is where the real skill of an underwriter comes into play, because she must look at all of the data and form a risk assessment before making a decision. This means that she must take all of the major loan factors into account---income, job history, credit history, assets, debt-to-income ratio and appraisal strength---and weigh them all to make a final decision. Sometimes a person may be carrying a lot of debt compared to their income, but are an intern at a hospital and have a stellar credit history. Another person may have a few blemishes on their credit, but have a steady job, substantial equity in the home or a large down payment.
The ultimate job of the underwriter is to determine the ability of a borrower to pay the loan back, the risk of default and if the loan file meets the program guidelines. It is not an exact science and requires a great deal of skill in order to maximise the amount of loans processed and profit made while minimising the lender's exposure to bad loans. Many times an underwriter looks at a file and has a question about some information in it or wants some additional information before he can issue an approval, so he sends the file with a list of conditions back to the loan processor.
If the processor and the loan officer can get the required information that addresses the underwriter's concerns, the loan is approved. Loans are denied on occasion, but that does not happen often because the loan officer and the loan processor typically screen any loans that do not have a good chance of approval. After all conditions are met and the underwriter approves the loan, the underwriter sends the loan through to funding, which cuts the check, assembles the closing documentation and sends both to the closing agent.
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