What Do Mortgage Underwriters Ask for During the Underwriting Process?

The 2024 FHA Loan Handbook

Reader question: “We recently applied for a home loan and were told that we would not get a final approval until the underwriter reviewed our file. Our loan officer said we might have to provide some additional documents during this stage, but he didn’t specify what they might be. What do mortgage underwriters ask for during the underwriting process?”

Your LO was right. There’s a good chance the underwriter will ask you for additional documents when he or she starts reviewing your file. After all, it is this person’s job to ensure that the mortgage loan is sound, and that involves determining the borrower’s ability to repay the loan.

The underwriter will also ask for documents, records and letters needed to satisfy specific loan program guidelines (FHA, VA, Freddie Mac, etc.).

And yes, the underwriter can recommend a loan denial, if he feels it is warranted.

What Do Mortgage Underwriters Ask for When Reviewing a Loan?

So, what all can the underwriter ask for? Basically, if it has to do with your current or past financial situation, it’s fair game. You might also have to provide documents relating to previous home ownership, along with letters of explanation to clarify certain financial transactions.

Here are some things the underwriter might request during your underwriting process:

1. Letters of Explanation (LOX)

There are several situations where a mortgage underwriter might ask for a letter of explanation. The LOX (as it’s known in the industry) is a very common request. So don’t be alarmed if you receive one.

For instance, if you have a recent gap in your employment, the underwriter might request an LOX to clarify the gap and why it occurred. Other scenarios that might warrant an LOX include recent deposits into your bank account, recent credit inquiries, money transfers, etc.

2. Proof of Earnest Money

The mortgage underwriter might ask for documents that provide evidence of your earnest money deposit. This can be verified with a cancelled check or proof of a wire transfer. This is another very common request.

3. Gift Letter from Donors

If you had money donated to you from a friend or family member to help cover your home buying expenses (down payment and closing costs), the underwriter will probably ask for a gift letter. This letter should be written by the person who provided the funds.

In short, it specifies the amount they provided and asserts that they do not expect any form of repayment. (The gift money must truly be a gift, not a loan.) The underwriter may also request a copy of the check or wire, to verify the transfer of funds.

4. Verification of Employment

It is common practice for mortgage underwriters to ask for a Verification of Employment (VOE). The lender usually sends this document directly to the employer, who must fill it out and return it. Or they might give you the paperwork and have you handle it. Either way, the purpose is the same.

The underwriter wants to know your dates of employment, along with your job-related income for the last two or three years. He or she might also want to know about the probability of your continued employment — at least for the foreseeable future.

5. Sourcing Large Deposits

Mortgage lenders usually attempt to “source” all recent bank deposits over a certain amount. This means they want to know where the money came from. They want to identify the source of the funds, hence the term “sourcing.”

In most cases, any deposit over $500 will have to be sourced. So the underwriter might ask for an LOX or other documents to verify the source of such deposits. They do this to make sure you haven’t taken on any additional debt (like a personal loan) that would affect your debt-to-income ratio, and possibly disqualify you for mortgage financing.

6. Executed Sales Contract

You can expect your underwriter to request a copy of the signed and fully executed sales contract, as well. It’s common practice for real estate agents to deliver this document to the mortgage team. But don’t let it fall through the cracks. Be proactive and follow up. Ask your agent if he/she delivered the contract to the underwriter.

This list is not exhaustive. There are literally dozens of documents and letters a mortgage underwriter might ask for during the underwriting process. This list just covers some of the most commonly requested items.

Brandon Cornett

Brandon Cornett is a veteran real estate market analyst, reporter, and creator of the Home Buying Institute. He has been covering the U.S. real estate market for more than 15 years. About the author

The 2024 FHA Loan Handbook