Over 1.33 million mortgage loans originated in the first two quarters of 2025, according to CMHC. Each mortgage must go through a mortgage underwriting process before being approved. But what does a mortgage underwriter look for, and how can you prepare for this important step in the homebuying journey?
Underwriters check your finances and the home’s value and condition to make sure you can afford the loan. Get ready by collecting documents, such as tax returns and bank statements, and make sure you have enough money saved for the down payment and closing costs.
Key Takeaways
- Underwriting is an important step of the mortgage approval process, where an underwriter will evaluate your credit and financial background
- Your credit score and history, outstanding debts, and down payment amount factor heavily into your mortgage approval
- During underwriting, do not change jobs, take on new debt, or apply for new credit to prevent derailing your mortgage application
Mortgage Underwriting Process
The residential mortgage underwriting process starts with submitting the necessary documents to your mortgage lender or broker. Then, the underwriter will use your financial information to determine if you meet the criteria for a mortgage.
Submit Mortgage Application
Your mortgage broker or lender will first request a list of paperwork for review. This includes:
- Proof of employment and income – Recent pay stubs, letter of employment, two years of T4s, and T1 general for self-employed individuals
- Proof of down payment funds – 90 days of bank statements from your account with the down payment amount. A letter certifying the source of the down payment funds, if they are a gift
- Debts – A complete account of debts and financial obligations
- Property documentation – The real estate listing, sale agreement, housing cost estimates, and your lawyer’s contact information
Review Process
Once you’ve submitted your financial documents, the mortgage underwriter will review your application. During the review process, the underwriter is assessing your risk to the lender. For instance, they want to be sure you will be able to pay the mortgage.
Essentially, the underwriting process assesses the 3 C’s: credit, capacity, and collateral.
- Credit – The underwriter assesses your credit report and history to determine your mortgage eligibility. A low credit score or opening new credit during the application process can lead to denial
- Capacity – They will assess your ability to pay for expenses related to buying a home, including the mortgage payment, property taxes, condo fees, and heating costs, which is calculated using the gross debt service ratio. The underwriter will also ensure you can pay housing expenses alongside other debts you have, which is calculated using the total debt service ratio
- Collateral – The underwriter will calculate the loan-to-value ratio by comparing your down payment amount to the purchase price (or the appraised value, whichever is lower). A lower loan-to-value ratio is riskier for lenders, and they may ask you to increase your down payment in order to approve your application
Get Appraisal of Property
A home appraisal determines a property’s value for mortgage purposes. This is an essential step for mortgage lenders because the property’s value directly impacts the loan-to-value ratio, and lenders want to ensure the property is worth the loan amount requested. There are two types of home appraisals: desktop appraisals and in-person appraisals. The appraisal method will determine how long the process will take.
In a desktop appraisal, a licensed appraiser reviews online data, including property tax records, previous appraisals, Multiple Listing Service (MLS) data, Google Maps, and other relevant sources to determine the home’s value. Desktop appraisals are common in low-risk situations or in competitive real estate markets. However, desktop appraisals may not be as accurate as a full appraisal.
During an in-person appraisal, an appraiser will physically inspect the property in addition to reviewing online data.
Get Home Insurance
Most mortgage lenders require proof of home insurance before you are approved for a mortgage. You will typically need a binder letter from your home insurance provider, confirming the policy’s activation on the closing date.
Receive Decision
After the underwriting process is complete, you will receive the lender’s decision. There are several possible outcomes, including:
- Approval – The lender approves your mortgage application, in which case, you will proceed with closing on the property
- Conditional approval – The lender may grant conditional approval, meaning your loan is dependent upon meeting specific requirements, such as proof of homeowners insurance or providing additional documentation
- Appraisal issues – If the property is appraised for less than the purchase price, you may need to increase your down payment to make up the difference
- Income or debt issues – If your personal financial situation does not allow you to be approved for a mortgage, you may need to find a guarantor or co-signer, or wait until you have paid off debt or increased your income
- Denial – It’s possible that you won’t qualify for a mortgage loan. In that case, you may need to find a less expensive property, save up a larger down payment, or improve your credit score before applying again
Proceed with Closing
Once approved, you can move forward with closing, provided you’ve met all purchase agreement conditions. On the closing date, you’ll perform a final walkthrough of the property, sign the closing documents, and pay your closing costs. Your lawyer will handle the fund transfer, mortgage registration, and handing over the keys.
How Long Does Mortgage Underwriting Take?
Once you’ve submitted all your documents, mortgage underwriting can take a few days to several weeks. However, the process may take longer, depending on the lender and your financial situation. If your approval is conditional on a home inspection or appraisal, it typically takes about 25 days to obtain full approval.
How to Ensure a Smooth Underwriting Process
Buying a house can be a stressful time, but there are several ways you can help the mortgage underwriting process move along smoothly:
- Organize your documents – The mortgage application process involves several documents, so gathering them ahead of time can speed up the process
- Work with a knowledgeable lender – Choose a mortgage broker who is familiar with mortgage requirements can help guide you through each step
- Be honest about your financial situation – A lenders (like big banks) have strict guidelines to follow when approving a mortgage. Be upfront about your income, debt, credit score, and down payment amount
- Maintain your finances – Do not change jobs, make big purchases, or open new credit cards during the review process
Bottom Line
Mortgage underwriting is an important step in the homebuying process. You’ll need to be organized and work with a knowledgeable professional to help the process go smoothly. Search for your next home on Zolo.ca and let us help you through the process, from viewing to closing.
Mortgage Underwriting FAQ
What happens when a mortgage goes to underwriting?
When a mortgage is sent to underwriting, a professional underwriter reviews your financial documents and assess your risk as a borrower. The underwriter may request additional information before approving your mortgage application.
Is underwriting the last step before closing?
After underwriting, the lender gives final mortgage approval to you and your lawyer. Then, assuming any other conditions in the purchase agreement are met, your home will close on the designated closing date.
How can I speed up underwriting?
You can speed up the mortgage underwriting process by having all your documents in order ahead of time. In addition, ensure you are prepared to purchase a home with a sufficient down payment, a good credit history, and a stable income.
What is a red flag in a mortgage?
Mortgage application red flags include poor or lack of credit, high debt, unstable or self-employed income, and insufficient down payment savings. In some cases, you may be able to get a mortgage through an alternative or B lender.
