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When Does an Underwriter Turn Down a Loan?

what does a mortgage underwriter look for

An underwriter considers many factors before approving a loan.

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You picked out the house you want, submitted the mortgage application and provided supporting documents. Now your fate rests in the hands of the underwriter. It is this person who will decide whether or not your loan is approved or denied. Underwriters consider various factors when making their final decisions, and knowing which ones will cause them to turn down a loan can help you improve your approval chances.

The Underwriter Role

Once your loan application for a home purchase has been received and processed, it moves on to the desk of the underwriter. The underwriter is responsible for evaluating whether or not you are an acceptable financial risk for the lender to take. Income, credit, cash reserves and the property itself are four of the most important criteria that an underwriter will examine to determine whether or not he should approve the loan. If everything checks out, the loan will be conditionally approved.


Your credit score and history play an important role

in the underwriting process. In general, a minimum credit score of 640 is required for approval of a mortgage loan, according to CNNMoney. Even if you have a high credit score, blemishes in your history such as a past short sale can hurt your chances. If your credit score or history is not impeccable, it is best to prepare an explanation of any issues, correct errors, and cure and delinquencies ahead of time. Failure to do so might lead an underwriter to turn down your loan.


When it comes to income, underwriters will look to see that you make enough to comfortably pay the mortgage each month. CNNMoney says that if housing costs take up more than 28 percent of your gross income, this will give the underwriter pause. Failing to properly document income is one of the most common reasons that loans are rejected. Underwriters require tax records to back up your income claims. Gaps in employment and frequent job changing are also bad signs for an underwriter to see.

Cash Reserves and Closing Costs

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