Why Do Underwriters Request so Much Documentation? (2024)

Welcome to the second installment in our Understanding Underwriting series! In our last piece, we laid out the basics of what an underwriter is and does. We know our customers frequently have questions about the volume of documentation requested in the lending process, so we hope this piece directly from our Underwriting Manager addresses some of your concerns.

Underwriting is the culmination of a documentation-heavy process required to secure your loan, so our department understands why our customers sometimes have concerns about our requests after having complied with many others. I think I speak for Apex as a whole when I say that it’s important to remember that all customers are treated equally when it comes to document requests, and all mortgage lenders ask for equivalent documents to approve a loan. Fundamentally, the reason we request so much documentation is simple: lenders must prove a borrower’s ability to repay their loan before approving it, and we want to make sure your application is as strong as possible.

An Underwriter ‘narrates’ your financial story

As you know, financial inquiries are standard protocol for all mortgage transactions, and as a lender processes a loan, it is likely that you will receive requests from not only your Mortgage Banker, but also from document-preparation professionals (i.e. mortgage planners, processing, and quality control) and, ultimately, underwriting (that’s me!). At the end of this process, an underwriter has to be able to “tell a story” about your profile as a borrower. While a number of documents have likely already been collected to get started in this process, part of an underwriter’s job is to ensure that all of the pieces are current, complete, and that there are no gaps in your financial narrative. There may be certain documents, for example, that are required to fully satisfy Government-Sponsored Enterprises guidelines (i.e. Fannie Mae and Freddie Mac), and others that must be included to “fill in the blanks” of your financial journey.

Underwriters must verify the source of your funds

Yet another reason why an Underwriter may request additional documents from a borrower is to verify the source of specific funds. Have you ever wondered why underwriters care about large deposits? The reason is this: an underwriter must show that all funds for a purchase transaction come from an acceptable source. Basically, this means that none of the funds used in the purchase can be borrowed from a friend or from an unsecured loan, i.e. a credit card advance or personal line of credit.

In a similar fashion, this is also why underwriters need the URL (web address) on the printed web documents showing your transaction history if they are proof of assets. The URL is used to identify the financial institution holding your assets as required by regulatory agencies. This document request is an important one: If you cannot provide a transaction history showing a valid URL, lenders cannot accept it as satisfaction for the requested documentation.

Other common Underwriting requests

Depending on your situation, an Underwriter may also request items such as a Borrower Letter of Explanation (LOX), Gift Letter, or Evidence of Earnest Money. In each of these scenarios (and most others), an Underwriter is simply identifying any weak points in your loan application in order to strengthen it on your behalf and ensure GSE and investor approval, not to mention the financing for your dream home!

Looking to learn more about the mortgage process?

Our Homebuyer’s Guide contains a complete glossary of mortgage terms, explanations of the merits of different loan types, and details about first-time buyer programs that could save you money.

Topics: mortgage process, Home Loans, Buying a Home, Underwriting, Why Lenders Require So Many Documents, why underwriters request documents