What Is Mortgage Underwriting? Here’s What To Expect In Ghana

Getting a mortgage in Ghana goes through several processes. Many home buyers in Ghana and real estate investors are unsure of what to anticipate from the underwriting process. This is because the process is normally a hands-off step in the loan approval process. However, it's crucial to understand what's going on behind the scenes, since there are actions you can do to make sure this runs as smoothly as possible.

In this process, the underwriter will look at the borrower's current financial situation, including their income, debts, and assets. In order to get a mortgage in Ghana approved the underwriter will also look at the borrower's credit history, including any past financial problems.

The underwriter will also consider the borrower's proposed mortgage loan amount, the interest rate, and the terms of the loan. The underwriter will also review the borrower's proposed mortgage loan agreement.

What is mortgage underwriting?

Underwriting a mortgage in Ghana is the process of assessing a borrower's ability to repay the loan and is one of the most important steps in the mortgage application process. If the underwriter approves the loan, the borrower will be issued a mortgage loan agreement.

Read Also: Best Mortgage Houses For Sale In Ghana 2022

Role of a mortgage underwriter

The underwriting procedure involves several steps, which is why it seems to take so much time. Here is what to anticipate.

Applications Review

The first step in underwriting a mortgage in Ghana is to confirm that the loan application is full and in-depth. Sending back extra information when an application is incomplete is one of a mortgage underwriter's most significant responsibilities. The loan underwriting process can be sped up by making sure that applications are complete and that all supporting documentation is included.

Risk assessment

The slightest oversight on the part of a loan underwriter might expose a lender to the possibility of a borrower default. The lender is adversely affected by this. Therefore, before submitting the clear to close, an underwriter receives extensive training in studying and evaluating all aspects of the risks involved.

Financial review

A financial review is a document prepared by a mortgage lender during the underwriting process that assesses the borrower's financial situation and determines whether the borrower is qualified to obtain a mortgage. The review includes a review of the borrower's credit history, current income and expenses, and any outstanding debts.

The financial assessment provides the underwriter with confirmation that you have enough income to cover your monthly mortgage payment, the down payment, closing expenses, and any unforeseen maintenance or costs.

Property valuation 

When a mortgage is underwritten, one of the first things that are considered is the value of the property. This is done to ensure that the mortgage payments will be able to cover the costs associated with the property, including property taxes, insurance, and maintenance. 

There are a few methods that are used to determine the value of a property. The most common method is to use an appraisal. Appraisals are done by a professional who is familiar with the area that the property is located in and the market trends for that type of property. In fact, the appraised value should be an “arm’s length” transaction, meaning neither you nor the lender can “choose” the appraiser.

Verify Creditworthiness 

Credit history is a key factor that lenders use to underwrite a mortgage application. A good credit history indicates that you have a history of paying your bills on time and that you have a low risk of defaulting on a mortgage.  

A borrower's creditworthiness can make the difference between a loan being granted or denied. The loan applicant's repayment history is scrutinized as part of the loan underwriting procedure. The mortgage underwriter meticulously verifies all information, including the borrower's payment history for previous loans, credit card usage, and bill-paying habits.

Your credit creditworthiness will be looked at in two main areas:

• Your credit score: This is a number that lenders use to determine your borrowing capacity. A good credit score means you will get a lower interest rate on a mortgage.
• Your credit history: This is a list of all the credit accounts you have ever had, including loans, credit cards, and store credit.

The mortgage underwriter’s decision

A mortgage underwriter’s decision-making process typically includes the following steps:

1. Undertake a thorough analysis of the applicant’s personal financial situation and credit history. This analysis includes a review of the applicant’s current mortgage, credit card, and other debt obligations.

2. Determine the applicant’s eligibility for a mortgage based on their personal financial situation and credit history. Eligibility for a mortgage typically depends on the applicant’s debt-to-income ratio, credit score, and other factors.

3. Review the applicant’s current mortgage and determine whether it should be approved, denied, suspended, or conditional approval. If the mortgage is approved, you'll have no further action. Congratulations! 

Read Also: Step By Step Guide On How To Apply For A Mortgage in Ghana

What does an underwriter look at?

An underwriter takes a broad look at your finances. This includes:

• Mortgage underwriter looks out for applicant income flow: This will determine your ability to repay the loan without default.
• Down payment: The underwriter will determine if you have money for the down payment and closing costs.
• Credit score and history: Credit score is a number that lenders use to evaluate a person’s creditworthiness. The higher your credit score, the lower your interest rates will be on a mortgage, car loan, or other borrowings.
• Debt-to-income ratio (DTI): This is simply the amount of debt divided by your income. If your debt-to-income ratio is too high, you may not be able to afford the mortgage payment. Additionally, if your mortgage is not paid on time, you may end up in foreclosure.
• Loan-to-value ratio (LTV): The ratio is a measure of a mortgage’s risk-to-return. It is calculated by dividing the loan amount by the value of the property being purchased. A high LTV ratio indicates a higher risk of default and may result in a higher interest rate. A low LTV ratio indicates a lower risk of default and may result in a lower interest rate.

Why do mortgage lenders Outsource mortgage underwriting?

An organization that specializes in mortgage underwriting typically has many years of experience in offering comprehensive support and services for the underwriting process. This gives it access to significant resource pools. This enormous resource pool can be unlocked by outsourcing the mortgage underwriting process, which would also assist lenders in streamlining their internal operations.

Typically, outsourcing mortgage underwriting offers the lender a complete answer. The businesses use access to specialized software systems and sizable support staff to offer the lender a tailored solution that takes care of every part of a reliable underwriting solution.

The function of a mortgage underwriter is essential to the acceptance of a mortgage loan. A lender may be able to approve mortgage loans more quickly by outsourcing the underwriting procedure.

Mortgage underwriting mistakes to avoid in Ghana

The mortgage underwriting process is complicated and delicate. Here’s what home buyers in Ghana shouldn’t do while the underwriter is working.

1. Ignore emails from the lender. To ensure that everything moves as swiftly and easily as possible, you should be accessible right away to respond to any inquiries or deliver any necessary paperwork. After you get into a contract to purchase a home, make sure to check your email at least once every day.
2. Offer to buy at the wrong price. When an appraisal is underwhelming, it happens sporadically rather than frequently. It's possible that you (and your agent) made an offer that was higher than the property was worth if the appraisal does come back lower than your loan amount. Make sure you are considering comparable properties in the same area that have recently sold in order to establish an accurate offer price and prevent appraisal difficulties.
3. Lying to your lender. The act of fact-checking every claim you make in your loan applications is known as underwriting. If you lied about some details relating to your income or savings, this will catch up with you in this last phase. You should be completely honest about your financial situation upfront so that, in the event of a denial, it may be resolved as quickly as possible (as opposed to after you've already made a commitment to one home and paid for inspections).

The final step for your lender is underwriting, during which they confirm all of your information and determine whether or not to formally provide a loan. Your lender will confirm your income, debts, and assets when you enter into a contract on a property. They'll also order an appraisal and a title check for the property.
Make sure your offer is at the appropriate price and on the right property in addition to simply being cooperative and truthful throughout the entire financing process to prevent issues with approval. To ensure a smooth underwriting procedure, manage your money wisely and steer clear of major transactions during the entire home-buying process. After underwriting, you're on your way to closing and becoming a homeowner!