When most people apply for a mortgage, they imagine a cynical person going through their application looking for faults. If this sounds familiar, you might be surprised to learn about automated underwriting.

Automated Underwriting of Your Mortgage

Underwriting has nothing to do with funeral homes. It is the process whereby a lender analyzes your application for a home loan and either approves or denies it. This is known as underwriting and the person that makes the determination is the underwriter. More than a few lenders, however, have at least partially moved away from this process. The primary reason is a human being can only do so much. To this end, traditional underwriting usually took between thirty and sixty days to complete. No more!

Since you are reading this on the web, you know first hand how far the digital age has progressed. Simply put, there is a computer program for practically any need these days. Well, the mortgage business is no different. Many lenders now do automated underwriting of certain loans.

Automated underwriting is simply a process whereby a lender used a computer program to evaluate a loan application. The programs come in many forms, but Fannie Mae offers a couple that the most popular. These programs analyze a number of things. They look at traditional issues such as your credit score, your payment history on other debts, income to debt ratios and so on. Many lenders, however, also use them to analyze whether the loan can be sold on the secondary mortgage market.

If you have ever financed a home or had student loans, you already know about the secondary finance markets. With mortgage loans, there are certain entities that prefer to work with the public and others that do not. Retail mortgage lenders will often process and write a home loan with no intention of servicing it through the 15 or 30 year term. Instead, they sell the loan as part of a package of loans on the secondary markets to another entity that will then process it. Your loan can actually be sold numerous times, a situation that can be baffling for many borrowers when they receive different invoices every few months. Regardless, the secondary market is a big part of the mortgage industry and automated underwriting evaluates your loan application with it mind.