Example 1
You sent a bank statement → a large deposit appears → the lender may ask where the deposit came from.
MORTGAGE UNDERWRITING
What Happens During Underwriting?
Underwriting is the lender's review of your mortgage application, documents and property. Here's what to expect and why additional documents may be requested.
- Application
- Documents
- Underwriting
- Approval
Underwriting in Simple Terms
After you apply for a mortgage, the lender needs to confirm that the loan meets the selected program's requirements.
The underwriter (the lender's reviewer) may review:
- income
- employment
- assets
- credit
- debts
- property
- appraisal
- insurance
- title
- other program-specific documents
Not every mortgage requires the same documents.
How a File Moves Through Underwriting
- Application
- Initial Documents
- Underwriter Review
- Conditions
- Final Review
- Clear to Close
What Does “Condition” Mean?
A condition is simply something the lender needs before the mortgage can move to the next stage.
Examples may include:
- A newer bank statement
- Another paystub
- Proof of a deposit
- Insurance information
- Appraisal information
- Title documents
- Condo documents
- A short explanation letter
Getting conditions does not automatically mean there is a problem with your loan.
“I Already Sent This. Why Do They Need More?”
Mortgage documents can become outdated during the process.
The lender may also need clarification when new information appears in a statement, credit report, appraisal or another document.
Example 2
The file takes several weeks → the lender may ask for a newer statement before closing.
What Is a Letter of Explanation?
Sometimes the lender needs a simple written explanation about something in the file. This is commonly called a Letter of Explanation (LOE).
Examples:
- unusual bank deposit
- address difference
- credit inquiry (a lender checking your credit)
- employment change
- property ownership question
- other information that needs clarification
An LOE should usually be simple, factual and directly answer the question being asked.
Why Do Large Deposits Matter?
If the lender is using your bank funds for down payment, closing costs or reserves (savings left after closing), it may need to understand where certain deposits came from.
Examples of documentation may include:
- transfer records
- sale documents
- gift documentation where allowed
- account statements showing the source
Do not move large amounts of money between accounts unnecessarily during the mortgage process without keeping clear records.
Avoid Major Credit Changes Before Closing
During the mortgage process, avoid making major credit changes without first discussing them with your mortgage professional.
- opening a new credit card
- financing a car
- taking a personal loan
- significantly increasing credit-card balances
These changes can affect the mortgage review.
Tell Us If Something Changes
If your employment or income changes during the mortgage process, tell us as soon as possible.
- new employer
- change from salaried to self-employed
- reduced hours
- leave from work
- change in compensation
It is better to review a change early than discover it immediately before closing.
The Property Is Reviewed Too
Underwriting is not only about the borrower. Property-related conditions can include:
Appraisal
Property value and appraisal requirements. An appraisal is an independent estimate of the property's value.
Insurance
Required property insurance, and flood insurance where applicable.
Title
Ownership, liens (existing claims on the property) and other closing/title items.
Condo / HOA
For condo properties, the lender may review HOA and project documents.
Foreign National Files May Look Different
Foreign National mortgages may use documents from outside the United States. Depending on the program, the lender may request:
- foreign bank statements
- foreign income/employment documents
- accountant letters
- passport/identification
- proof of foreign residence
- translations
- foreign credit/reference information where required
The exact requirements depend on the lender and program.
Foreign National MortgagesDo Foreign Documents Need Translation?
Some lenders may require documents that are not in English to be translated.
The translation requirements can vary.
Before paying for a translation, check what the selected lender actually requires.
What Is Conditional Approval?
Conditional approval means the lender has reviewed the file and is willing to continue, but certain items still need to be completed.
Once those conditions are satisfied, the file goes back for final review.
What Does Clear to Close Mean?
Clear to Close (CTC) means the mortgage has reached the final stage before closing after the required underwriting conditions have been cleared.
Some final closing steps may still remain.
Help Keep Your Mortgage Moving
- Send requested documents promptly
- Send complete pages, not partial screenshots
- Keep clear records of money transfers
- Tell us about major financial or employment changes
- Avoid unnecessary new credit
- Ask before moving large amounts of money
- Read document requests carefully
A condition is something the lender needs before your loan can move to the next step — for example a newer bank statement, proof of a deposit or insurance information. Getting conditions is normal and does not automatically mean there is a problem.
An LOE is a short written note that explains something in your file, such as an unusual deposit, an address difference or a recent credit inquiry. Keep it simple, factual and focused on the exact question the lender asked.
It's best to talk with your mortgage professional first. A new job, a change in income, a new credit card, a car loan or higher card balances can cause the lender to review your file again. If something changes, tell us as early as possible.
Underwriting is the lender's review of the borrower, credit, income or qualifying methodology, assets, property, appraisal, title and applicable loan guidelines before making the final lending decision.
An underwriter may request additional documents to verify information in the file or satisfy a specific loan guideline or condition. Additional document requests are a normal part of many mortgage transactions and do not necessarily mean there is a problem with the loan.
A conditional approval means the lender has reviewed the loan and identified specific conditions that must be completed before final approval and closing. Conditions may involve borrower documents, assets, appraisal, title, insurance, condo information or other loan requirements.
Clear to Close, commonly called CTC, means the lender has cleared the required underwriting conditions to the point that the loan can proceed toward final closing documents and closing, subject to any final closing requirements.
A large deposit or international wire is not automatically a problem. The lender may request bank statements, wire confirmations, sale documents or other records showing where the funds originated and how they reached the account.
Have a Question About a Mortgage Condition?
Send us the condition or document request and we'll help you understand what the lender is asking for.
This page is general information, not a loan offer or approval. Requirements vary by lender and program.