Facebook
X
Pinterest
Copy Link
What Underwriters Look for When Reviewing Loan Documents
This article explains what underwriters look for when reviewing loan documents, why certain requests happen when they do, and how timing and completeness affect the process.
For many buyers, underwriting feels like a black box. You submit documents, hear nothing for a while, then suddenly get a request for “more information” that feels confusing or discouraging.
In reality, underwriting is a structured review process. The documents lenders ask for are not random, and they are not requested out of curiosity. Each one exists to answer a specific question about your ability—and willingness—to repay a loan.
This article explains what underwriters look for when reviewing loan documents, why certain requests happen when they do, and how timing and completeness affect the process.
The Six Items That Trigger Formal Loan Disclosures
Before talking about checklists or underwriting logic, it’s important to understand what legally turns a conversation into a loan application.
Under federal lending rules (TILA/RESPA), once a lender has the following six items, formal loan disclosures are typically required:
- Borrower name
- Borrower income
- Borrower Social Security number (to pull credit)
- Property address
- Estimated property value
- Loan amount sought
Once those six items exist, the lender can no longer speak purely hypothetically. The system must generate loan estimates or loan summaries showing what the proposed loan would look like.
Important: Loan Estimates and similar disclosures are not approvals. They are required responses to having enough information to model a loan.
Why Talking to a Lender Is Early—But Finding a House Comes Later
Talking to a lender early is smart. Attaching a specific property too early often is not.
Finding a house before your credit, budget, and financing reality are stable can trigger disclosures and documentation that create confusion and unnecessary work—especially if eligibility hasn’t been established yet.
This is why, in my Home Buying Series, property selection comes later in the process. If you want to see the full sequence and why it matters, start here:
Start Here: Home Buying Series.
Perspective: Why USDA Direct Shows Up in This Discussion
Most lenders today rely heavily on automated systems and hard cutoffs—often credit score driven—to decide quickly whether a file moves forward or ends.
I do not review loan files today. However, my thinking about what underwriters look for when reviewing loan documents comes from working in USDA’s Direct loan program, where those shortcuts did not exist.
At USDA Direct, every approval and every denial had to be fully documented and explained. That experience stripped underwriting down to its fundamentals and shapes how I explain this process now.
Most buyers will never apply for USDA Direct, and many won’t be eligible. If you want a deeper look at that program specifically, I’ve written a separate, detailed explainer here:
USDA Direct Loans Explained.
How Underwriters Think: The Four Core Questions
Across lenders and loan programs, underwriting generally revolves around four core areas—often called the “Four Cs”:
- Credit – your history of repaying obligations
- Capacity – your ability to repay based on income and stability
- Capital – assets and reserves
- Collateral – the property (once one is supplied)
In programs like USDA Direct, Capacity—your ability to repay—was usually the driving factor, with the others used to support or explain it. Other lenders may weight these differently, but the framework is consistent.
The Checklist Rule: Provide It, Mark N/A, or Explain It
When a loan file comes in, the first question is not “Is this approved?” It is:
Is this file complete enough to review?
Every requested item must be one of three things:
- Provided
- Marked N/A
- Explained in writing
Blank items are not neutral. Blank items are unknown—and unknowns trigger follow-up requests and delays.
Identity, Credit, and Authorization
The first group of documents establishes identity and permission:
- Unexpired government-issued ID
- Taxpayer ID (usually SSN)
- Authorization to pull credit
- Authorization to verify employment, rent, and bank activity
If these items are missing, many lenders cannot legally proceed.
When derogatory credit appears, explanations are requested not to punish borrowers, but to understand patterns and context—something I emphasize early in the Home Buying Series.
Income: History, Snapshot, and Stability
Underwriters evaluate income over time, not just at a single moment.
- Tax returns, W-2s, and 1099s show history and source
- Pay stubs show current earnings
The key question is not “How much do you make?” It is:
Is this income stable and likely to continue?
Changing jobs for better pay or benefits is not automatically negative. Changing fields can still make sense if supported by training or credentials, but it often requires clearer explanation.
Assets, Bank Statements, and Explaining Deposits
Assets include bank accounts, vehicles, property, and retirement accounts. Retirement assets are usually documented but not expected to be spent.
Bank statements are used primarily to determine where money comes from. If the source of funds can’t be documented, they often can’t be counted—even if they’re real.
This includes fintech accounts and payment apps. Deposits may need explanation so they can be properly classified as income, reimbursements, or one-time events.
If you’re tempted to use retirement funds for a purchase, I explain why that’s usually a mistake here:
The Most Expensive Loan You’ll Ever Take Is the One Against Your Own Retirement.
Timeline Reality: Why Speed Depends on You
When I received a complete file, I could often review it, make a preliminary decision, and forward it for final review the same day.
Most files were not complete.
If documents arrived slowly or piecemeal, the timeline was entirely in the applicant’s control. Long gaps meant re-reviewing the file from scratch to integrate new information.
Files are not continuously reviewed while documents trickle in. Each delay resets context. If I requested 5 items, I wouldn’t review the items (other than to verify completeness), until I had all five items in hand.
Property Rules: All Programs Have Them
Every loan program has guidelines for what properties it can underwrite.
At USDA Direct, the property had to be Decent, Safe, and Sanitary—and also Modest.
That last word caused confusion. A Victorian mansion might be within a buyer’s price range, but it would not meet USDA’s “modest” guideline.
Other programs use different language, but the principle is the same: not every house qualifies for every loan. Knowing the rules upfront matters.
Make No Moves Without Talking to Your Lender
Once you are in underwriting, do not change jobs, open new credit, make large purchases, or move money without involving your lender.
I cover this in detail in Step 4 of my Home Buying Series:
Fixing Underwriting Issues — Home Buying Step 4.
What Underwriting Is Really Doing
Underwriting is not looking for perfection. It is looking for closure.
The goal is to determine, with documentation, whether you have both the willingness and the ability to repay the loan. When the answer is “not yet,” the best outcome is clarity and a roadmap forward—not mystery.
Understanding what underwriters look for when reviewing loan documents helps you avoid false momentum, reduce delays, and approach the process with realistic expectations.
This article is informational only and is not legal or tax advice. Loan guidelines vary by program and lender.
About Me — Doug Berry, MBA, REALTOR®
The Bow Tie Agent
I’m a REALTOR® with Better Homes & Gardens Senter, REALTORS® who focuses on helping clients understand the real-world side of homeownership—especially the decisions that affect long-term stability. 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, need help figuring out where you are in the process, or want a second set of eyes before making a move, feel free to reach out:
