What is the mortgage underwriting process in the UK?

With large sums of money at stake – and calculating risk not always simple – mortgage underwriting involves a professional underwriter looking into the details of your application.

What does the mortgage underwriter do?

The mortgage underwriter is employed by the lender to review your application and find answers to a number of questions, such as whether you can afford the monthly repayments, and if the home’s worth what you’re paying for it.

You won’t be able to get the mortgage unless the underwriter is happy with the level of risk, meaning it’s important to make sure your application is completed properly and in as much detail as possible. It’s worth knowing your application will also be compared with your financial history, so any discrepancies could affect your mortgage decision.

If you’re preparing to apply for a mortgage, this article can help. 

Get mortgage ready

What do mortgage underwriters check?

There are many things the mortgage underwriter will be looking at. While these will vary from lender to lender, here’s a guide to the most obvious things they’ll consider:

• Your income and expenses

The lender will want to know you can afford the repayments on the mortgage, so they’ll do thorough checks on what money’s regularly coming in (like your salary) and going out (like bills and groceries).

• Your debts

As part of their affordability checks, they’ll also want to know about any debts you have – as paying these back may impact your ability to make mortgage repayments.

• Your age

With mortgage terms often spanning decades, the underwriter will consider your age to check whether the term runs past your expected retirement age and that repayments will remain affordable well into the future.   

• Your credit report

In addition to affordability checks and any debts, your credit report will also show the lender if you’ve ever missed payments or defaulted on debts in the past. Having a good credit report is likely to make you appear less risky and more attractive to the mortgage lender.

• Your personal circumstances

They may also consider personal circumstances that could impact your financial situation. For example, dependent children, your job-stability, and even future earning potential could all play a part.

• The property itself

The underwriter will also want to know about the home you’re looking to buy. While the property valuation report is separate to the underwriting itself, a review of it will form part of the underwriter’s decision-making process.

Meeting their legal responsibilities

Mortgage lenders, beyond their own guidelines, must also meet certain legal requirements. To meet these strict requirements the underwriting process will include further checks on your application. For example, performing fraud checks to be sure your deposit is coming from a legitimate source. One of the best-known of these checks is the so called ‘stress test’.

The Financial Conduct Authority (FCA) ‘stress-test’

In addition to checking your current ability to meet repayments, lenders must perform a particular test as part of their legal responsibilities. The FCA affordability recommendation – the ‘stress-test’ – has been in place since 2014 and asks lenders to check if you would be able to afford drastic increases in the mortgage rate.

It’s a test designed to protect the homeowner, the housing market, and the wider economy in the event that mortgage rates were to skyrocket.

“When assessing affordability, mortgage lenders should apply an interest rate stress test that assesses whether borrowers could still afford their mortgages if, at any point over the first five years of the loan, Bank Rate were to be 3 percentage points higher than the prevailing rate at origination.” Financial Conduct Authority recommendation, 2014.

While it sounds scary if you’re looking to get a mortgage, in practice it’s not usually something you need to worry too much about. In fact, it’s likely just two per cent of renters are being held back from buying their first home because of affordability stress test measures, according to the Bank of England.

How long does mortgage underwriting take?

There’s no set timeframe. More straightforward cases may only take a couple of working days. In complex cases, or if further information is required, it may take weeks to get a final decision. Most mortgage underwriters don’t work weekends, though it’s not unheard of.

Where can I get more information on mortgage underwriting?

If you want more details about the underwriting process, there are lots of places you can go. Online research is useful for general info. If you have specific queries, your mortgage lender, or mortgage broker (if you have one), should be able to help.