Be a Mortgage Underwriter

A mortgage underwriter works with mortgage bankers and loan processors to determine whether or not a borrower's home loan application will be approved and under what repayment terms.[1] The underwriter determines whether a borrower is an acceptable risk based established guidelines and criteria regarding his credit use and history, capacity to repay the loan, and the collateral securing the loan. The Bureau of Labor Statistics (BLS) predicts an eight percent growth between 2012 and 2022 in the employment category of loan officers, which includes mortgage underwriters.[2] This is about average growth for all occupations, even though the housing market in the United States saw a dramatic downturn in the 2000s. Learning how to become a mortgage underwriter can help you start your path toward this lucrative and stable career.

Steps

Earning an Education

  1. Take relevant high school classes. There is no single career path toward becoming a mortgage underwriter, but there are important classes that can help prepare you for a job in that field. It's never too early to start studying mathematics, as you will need to be proficient in math and data analysis to become a successful mortgage underwriter.[3]
    • The best preparation for a career in mortgage underwriting is to take as many accounting and mathematics classes as possible.[3]
  2. Apply to college. Most schools do not offer a specialized degree in mortgage underwriting, but mortgage firms and banks tend to look for certain education credentials in mortgage underwriter applicants. Knowing what courses and degree programs to study can help you secure a better position as a mortgage underwriter.
    • Loan officers like mortgage underwriters are typically required to earn a four year bachelor degree.[3]
    • Many mortgage underwriters major in business administration or finance.[4] There is no firm requirement, however, and many successful applicants had other majors but took extensive coursework in accounting, business law, and insurance.[3]
  3. Pursue an internship. Many banks and banking industry trade groups now offer internships of varying lengths to interested college students and recent graduates. You'll need to actively pursue an internship, and there may be steep competition among other interested students.
    • Seek out internships by searching online for banking, investment, or credit analyst internships. You can also reach out directly to a banking institution or trade group in your region by searching for them online.
    • The Massachusetts Bankers Association runs a summer-long internship program that immerses college students in the world of financial banking.[5]
    • Similar opportunities are available for recent graduates. RBS Citizens (part of Citizens Financial Group) offers a year-long training program, which combines classroom studies on finance and credit analysis with rotating positions at the bank to give trainees a comprehensive introduction to all aspects of commercial banking.[5]
  4. Earn a degree. Once you've earned a four-year bachelor degree, either in business/finance or in another degree with relevant coursework, you're eligible to apply to most mortgage underwriting positions.[3] You'll need extensive on-the-job training, however, before you can become a certified loan officer.

Getting Training and Experience

  1. Apply for assistant/trainee positions. Before you can become a full-fledged mortgage underwriter, you will have to accrue entry-level experience and training. Most entry-level positions for recent graduates will be trainee or assistant positions.[3]
    • Most mortgage underwriters work for banks, credit unions, or mortgage broker firms.[3]
    • Search for entry-level mortgage underwriter jobs online. You can use websites like Monster.com or Indeed.com, or apply directly to firms by searching for financial institutions in your area.
    • Assistant or trainee positions often lead to jobs, either at the office you trained with or through connections made at that position.
  2. Acquire on-the-job training. Training periods typically last one year or less, with many training periods lasting only a few months.[3] This training is necessary to get recent graduates experienced in the day-to-day world of mortgage and finance.
    • Training may entail informal training, formal training sponsored by the firm or company you work for, or some combination of the two.[4]
    • If your firm or company uses underwriting software, you will be required to take classes and accrue experience working with that company's particular software programs.[4]
    • Try to make strong connections with colleagues at your entry-level position. Networking is a good way to find jobs in the future, either after your training ends or once you're ready to advance into a new position.
  3. Consider getting certified. Though certification is not a prerequisite for employment, a professional certification can increase an employee's salary by five to 10 percent. In the United States, the National Association of Mortgage Underwriters (NAMU) is the primary institution for mortgage underwriters seeking certification.[6] NAMU offers two primary certification options:
    • Certified Mortgage Underwriter (NAMU-CMU) - this certification option requires 12 hours of training. The candidate must then score an 85 percent or higher on a 30 question exam and successfully pass a criminal background check.[7]
    • Certified Master Mortgage Underwriter (CMMU) - this certification option is considered an advanced degree and requires 24 hours of training. The candidate must stills core an 85 percent or higher on a 30 question exam and successfully pass a criminal background check.[8]

Building a Career

  1. Know what's expected. A career in mortgage underwriting will entail a lot of financial risk analysis. Most day-to-day tasks will involve reviewing applications and conducting an in-depth analysis of the proposed loan package.[1] Common risks that will be predicted and assessed include:
    • Interest rate risk — this involves the potential losses that may be suffered as a result of fluctuating interest rates.[1]
    • Default risk — this focuses on the risk of a potential borrower defaulting on his loans if he becomes incapable of paying off his debt.[1]
    • Pre-payment risk — this risk requires the underwriter to speculate on the likelihood of the borrower paying off his loan before it matures. If this happens, the borrower effectively cuts out the lender's interest payments that would have otherwise accrued.[1]
  2. Learn how to underwrite a mortgage. In order to analyze a potential borrower's loan request, a mortgage underwriter will be required to examine the borrower's credit reports and income history, which may require pay stubs and/or W-2 statements.[1] The mortgage underwriter uses this information to calculate the borrower's debt-to-income ratio.
    • The debt-to-income ratio is calculated by adding the borrower's monthly liabilities (mortgage payments) to his obligations (month-to-month credit and loan payments), and dividing that number by the borrower's net monthly income, factoring in any recurring financial obligations such as child support or alimony.[1]
    • Any additional assets, such as checking/savings accounts, retirement funds, mutual funds, and stocks, are also factored into the equation to determine whether or not the potential borrower would be a high default risk.[1]
  3. Specialize your skills. Once you've entered the mortgage underwriter field, there is not very much room for advancement beyond becoming a manager unless you've earned a master's degree in a related field.[3] For this reason, many mortgage underwriters choose to develop advanced skills in specialized lending systems.
    • Common lending systems include Local Authorities Pension Plan (LAPP) loans, U.S. Department of Agriculture (USDA) loans, and Federal Housing Administration (FHA) loans.[3]
    • These lending systems are highly specialized and require a unique knowledge of lending rules and regulations. Skills are usually developed through continuing education classes, which are offered on a regular basis by professional mortgage organizations like the National Association of Mortgage Brokers.[3]

Tips

  • Stay abreast of developments in the real estate and financial markets. Your job will depend on interest rates, lending trends and whether people are buying homes, selling homes, doing both and doing neither.
  • Prepare for busy periods and slow periods. Your workload will depend on the number of people taking out home loans, which will fluctuate throughout the year and from one financial period to another.

Sources and Citations

  1. ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 http://www.rpfunding.com/mortgage-underwriting-process.cfm
  2. ↑ http://www.bls.gov/ooh/business-and-financial/loan-officers.htm
  3. ↑ 3.00 3.01 3.02 3.03 3.04 3.05 3.06 3.07 3.08 3.09 3.10 http://learningpath.org/articles/Mortgage_Underwriting_Manager_Career_Summary.html
  4. ↑ 4.0 4.1 4.2 http://www.bls.gov/ooh/business-and-financial/loan-officers.htm#tab-4
  5. ↑ 5.0 5.1 https://www.bostonglobe.com/business/2014/08/16/two-words-career-advice-for-college-grads-commercial-lending/k98xVlC48wiydli79WE6bO/story.html
  6. ↑ http://www.mortgage-underwriters.org/what-we-do/
  7. ↑ http://www.mortgage-underwriters.org/certified-mortgage-underwriter-namu-cmu
  8. ↑ http://www.mortgage-underwriters.org/certified-master-mortgage-underwriter-cmmu
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