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Fixing Underwriting Issues — Home Buying Step 4
Step 4 of my practical, experience-based Home Buying Series covers something most buyers eventually face: fixing underwriting issues uncovered by the lender or underwriter. In the real world, the first response isn’t always “yes.” More often, it’s “not yet.”
If you missed the earlier steps, find them here: Step 1–Know your Credit, Step 2 Build a Sustainable Budget, Step 3 Find a Lender
Most home-buying guides skip this part, but it’s where a huge amount of clarity—and frustration—happens. The goal of this step is to help you understand why issues come up, what they mean, and how to address them without derailing your goal of buying a home.
Fixing Underwriting Issues When “Not Yet” Is Not “No”
If your lender or underwriter asks for more information, then that is not a denial. It means they need clarification, documentation, or a better understanding of something that doesn’t make sense on paper. If you cannot provide a requested document, that may slow you down, but it is still something you talk through with your loan officer—not a reason to panic.
This is also where the lender you chose in Step 3 matters. A good lender explains the issues, shows you what needs to be fixed, and gives you a roadmap forward. A poor one simply says “no.”
Underwriting Looks at the Story Behind the Numbers
On paper, your file is just numbers and dates; however, the context behind them matters. Underwriters are trying to decide whether those numbers tell a story that makes sense.
One coworker at USDA worked with an applicant who had a long job history—too long. On paper, it looked like he jumped from job to job. But when they talked, a clearer picture emerged; in fact, the moves made perfect sense: he was a young auto mechanic with a growing family, moving shops to get raises and better insurance. When the right job came along, he stayed. Former employers confirmed he was rehirable.
What looked risky on paper made perfect sense once someone understood the context. That is exactly what underwriters are looking for when they ask questions.
Give the Lender Exactly What They Ask For
This step is essential for fixing underwriting issues, because missing items slow the processing of your file more than anything else. If the lender needs four weeks of pay stubs, they need four weeks—not three-and-a-half. If your employer gives you a hard time about printing them, explain how important it is and keep pushing until you get them.
Underwriters never ask for documentation out of curiosity; instead, they ask because something must be verified. Missing or incomplete paperwork will slow the process down or stop it entirely.
Income: Is It Stable and Dependable?
Underwriters evaluate income based on two questions:
- Is this income likely to continue?
- Is it reasonably predictable?
Seasonal work, second jobs, and variable hours don’t automatically disqualify you—but they do require explanation. For example, I worked with a high school teacher who spent summers working for the highway department so he would have Social Security in addition to Teacher Retirement. Logical and responsible, but without explanation, it would have appeared inconsistent. Clear explanations help underwriters evaluate stability and are often a key part of fixing underwriting issues early.
Assets: Showing What You Own and What You Owe
Assets are another common stumbling block. Many people focus only on what they owe and forget to list what they own. Lenders separate assets and liabilities on purpose.
If your car is worth $10,000 and you owe $7,000, the car is still a $10,000 asset. The loan is a separate liability. If you owe more than the car is worth, then the lender typically counts the asset portion as having a value of $0—not negative value—because negative equity cannot improve your approval picture. The goal is simply to present a complete and accurate list of what you own.
Tax Returns and IRS Transcripts
Tax returns cause trouble for many buyers. People file and forget, and when underwriting asks for W-2s, 1099s, or older returns, they don’t have copies. If that happens, you can download:
- Return transcripts
- Wage and income transcripts
from IRS.gov. Lenders need both the return and the documents used to prepare it. While at USDA, I helped many applicants retrieve what they needed—often sending screenshots showing exactly where to click and what to download.
Bank Statements and “Proving” Your Money
Bank statements are another common challenge. If you receive Social Security on a debit card, that card still has statements—and the lender needs them. The same goes for PayPal, CashApp, Venmo, and similar services. Underwriters must be able to track:
- where your money comes from, and
- how it flows over time.
If you cannot document the source of income or deposits, the lender cannot count them—even if they’re real. Fixing underwriting issues is more about providing documentation than anything else.
When Credit Is the Issue
Sometimes the barrier isn’t documentation—it’s credit. Many programs have minimum score requirements, but your score also affects:
- interest rates,
- insurance premiums, and
- credit card rates.
Your payment history on debts that appear in your Debt-to-Income Ratio (DTI—discussed in Step 3)—mortgage or rent, auto loans, student loans, and credit cards—affects your credit score the most. Being late paying back a friend is not the same as being late on a car note unless your friend reports to a credit bureau. Not likely.
Other major credit factors include:
- Credit utilization: high balances hurt your score.
- Mix of accounts: lenders like to see both installment loans (such as student loans, auto loans, or a mortgage) and revolving credit (usually credit cards).
- No credit history: operating entirely on cash can make it difficult to qualify for a loan.
Fixing Underwriting Issues Should Be Fast, Fixing Credit Takes Time
If credit is the reason your application stalled, then improvement takes time. There is no quick fix. There are no shortcuts. You should:
- dispute only incorrect items on your credit reports,
- stay current on all debts that report to credit,
- avoid opening new lines of credit, and
- avoid Buy Now Pay Later services.
Changing jobs or opening new credit lines during the loan process can stop your application entirely. And while credit repair companies often promise miracles, they cannot remove accurate information. At USDA, I saw applicants dispute correct items constantly—it never helped, and it makes lenders doubt your credibility.
Owning negative credit means acknowledging it honestly and explaining what caused it. For many people, especially during the COVID-19 pandemic, job loss or reduced hours made it nearly impossible to meet obligations. Context matters—as long as you provide it.
Not all borrowers fit into neat pigeon-holes. Not having traditional credit is not always a no. USDA’s Direct Loan program can consider non-traditional credit sources, but they’re still trying to develop a picture of your willingness and ability to repay your obligations.
All an underwriter at any lender is doing is trying to understand that willingness and ability to repay your debt. And while that phrase “willingness and ability” sounds awkward, some people can pay their debts, but choose not to. Others want to, but are unable to. Both pieces have to be in place before a lender will believe that you’ll repay the mortgage you get from them.
When the Answer Really Is “Not Right Now”
If you are living paycheck to paycheck, missing payments, and fielding calls from creditors, you may not be ready to buy a home yet. That is not failure. It is information.
This is where Step 3 becomes important. A real, honest budget will tell you whether homeownership is sustainable right now. If the numbers do not work, something has to change—income, spending, debt, or timing. Many buyers still want to push forward even when the budget shows they’re not ready. I understand that urge, but underwriting protects you from stepping into a situation you cannot maintain.
Your goal is not just to buy a home—it is to keep it.
If your budget shows you are not ready for homeownership right now, taking time to prepare is far better than forcing a loan that becomes impossible to maintain. Some loan programs, especially government-backed ones, carry long-term repayment obligations even if you walk away from the property. Understanding this early protects you later.
Next, we move on to Step 5, where you learn how to hire a Realtor.
About Me — Doug Berry, MBA, REALTOR®
The Bow Tie Agent
I’m a REALTOR® with Better Homes & Gardens Senter, Realtors who focuses on helping buyers understand the real-world side of homeownership — from lending and budgeting to navigating underwriting without surprises. With an MBA and experience as a lender with USDA Rural Development’s mortgage programs, I approach the process the same way I do with clients: clearly, calmly, and without sales pressure.
If you have questions about this step, need help preparing for a home purchase, or have a topic you’d like me to cover in a future article, feel free to reach out:
