Loan underwriting guidelines help a mortgage officer determine which options are available to help a client purchase or refinance a home and if an application meets the necessary guidelines for a particular loan product. During the underwriting process, a loan officer may validate a client's employment or credit history. Loan officers may also choose to review a home's appraisal and title report to help aid in the decision making process.

Types of Loan Underwriting Guidelines

Credit guidelines state that a client needs to have at least four lines of credit established for at least two years to qualify for most loans. Bankruptcies, repossessions, foreclosures, student loans, debts from a previous marriage, and late payments can impact a client's ability to qualify for a loan. Clients with credit scores of over 620 will get the most attractive loans, while clients with credit scores of less than 540 will likely need a 20 percent down payment to qualify for a higher interest rate loan.

Debt to income ratios are used to determine if a client has the capacity to repay a mortgage. Front ratios look at a client's housing expense to income ratio. Back ratios look at a client's total monthly obligations to income ratio. Clients with lower front and back ratios will qualify for conventional loans, while clients with higher ratios will likely need non-conventional or non-conforming loans.

Loan underwriting guidelines generally require that a client be able to prove that the down payment funds for a mortgage loan are from his or her personal income and not the result of a gift from friends or family members. Clients will typically need to show three months of bank statements, unless they are applying for certain types of non-conforming loans. Strong credit scores or low debt to income ratios can sometimes act as compensating factors for a client with down payment problems.