Question 1

What is underwriting in real estate?

Accepted Answer

Underwriting: the process of evaluating risk to determine whether to approve a loan, insurance policy, or other financial product. In real estate: mortgage underwriting (the lender evaluates the borrower and the property to determine whether the loan meets the lender’s guidelines and risk tolerance), title underwriting (the title company evaluates the title search to determine whether the title is insurable and what exceptions to include), and insurance underwriting (the insurer evaluates the property to determine the premium, coverage, and exclusions). Underwriting: is the gatekeeping function that protects lenders, insurers, and investors from excessive risk.

Question 2

What are the key underwriting standards for Florida mortgages?

Accepted Answer

FL mortgage standards: conforming loans (Fannie Mae/Freddie Mac guidelines: credit score 620+; DTI 43% or less; LTV 80% or less for no PMI; 3% minimum down payment), FHA loans (lower credit requirements: 580+ for 3.5% down; 500-579 for 10% down; DTI up to 50%; mortgage insurance required), VA loans (no down payment; no PMI; credit score varies by lender; certificate of eligibility required), and jumbo loans (above the conforming limit: $766,550 in most areas as of 2024; typically require: higher credit scores, lower DTI, and larger reserves). FL-specific: windstorm insurance (required in many coastal areas: the underwriter verifies adequate coverage).

Question 3

What causes underwriting delays or denials?

Accepted Answer

Delays: incomplete documentation (missing pay stubs, tax returns, or bank statements), appraisal issues (the property appraises below the purchase price), employment changes (the borrower changes jobs during the loan process), and large deposits (unexplained deposits in the borrower’s bank account). Denials: insufficient credit (low score or recent derogatory items), excessive DTI (debt payments too high relative to income), insufficient assets (the borrower cannot demonstrate adequate reserves), and property issues (the property does not meet the lender’s standards: structural defects, environmental issues, or zoning violations). Solution: address the deficiency and reapply.

Underwriting

Underwriting in Real Estate

Types

FL Standards

Delays/Denials

Related Terms

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