Can a Mortgage Underwriter Really Ask Me That?

From rushing to see new homes on the market to the tedious applications for financing to the nail-biting of waiting for an offer to be accepted, anyone who has purchased a home knows the emotional ups and downs of the process. Unfortunately, the real stress can come much later. Your offer is accepted, the mortgage company approved the loan, and you close in a few weeks. Things look great.

Enter the opposition: the mortgage underwriter.

Mortgage Underwriters Exist to Look for Your Questionable Choices

An underwriter or loan processor's role is to look for any suspicious financial activity that would make you a bad person to lend money to. While the actual lender is usually more than happy to give you a (very high) loan, the underwriter exists to review your risk level.

The information and documents you submit for a loan will be examined every way possible... and then the questions begin.

Questions That Seem Illegal, But Aren't

Generally, an underwriter examines your accounts and spending behavior for the past two to three months. Even if everything looks normal, you might have money in your account that isn't explained through income or account-to-account transfers. The questions you might be asked about this money can seem invasive, which might make you wonder if they are illegal.

Underwriters can (entirely legally) ask you to prove any of the following:

• That your grandparent or other family member died
• That your deceased family member wrote you a personal check for inheritance money
• What Venmo (and its emojis) or other unlabeled personal transfers were for
• That you went to college and still have student loans, or that your partner or parent is helping pay off student loans
  
• That your birthday money is, in fact, money for your birthday
• Your income (it is common for people to round their income up or down, not know their actual self-employed income, or forget about recent raises or bonuses)
  
• That you own your car (even if you bought it years ago — making current car payments opens up that can of worms)
• That you attended high school (via your high school transcripts)
• Why you changed your name after a wedding

An underwriter can also ask you to provide any of the following:

• Receipts for every purchase you made that someone reimbursed you for (I'm looking at the well-meaning children who shop online for parents that write them a personal check later)
• Any personal check written to or from you over the past couple months
• Birth certificates for children listed (or not listed) as dependents
• Letter of Explanation for any reduced benefits or changes in 401(k), retirement, or Social Security accounts
• Source of fund letters for small deposits
  
• Doctor's note that an illness or injury will not return and put you into debt
  
• Ads proving you had a garage sale or postings that you sold items online

Anything the underwriter spots while examining two months of statements can open a gateway into years of spending. If one questionable check or charge is in your account, they can ask to see just about anything from any time.

"One-off" gift money or payments are often the hardest to prove. A well-meaning parent might give you a check to pay off the rest of your car. That act can set off an avalanche of proving you own your vehicle, every payment since you got it, the account your parent drew the money from, and more.

Underwriters Cannot Directly Ask You Anything

It is important to note that underwriters should not be in actual contact with you. All questions and discussions should be handled through your lender or loan officer. An underwriter talking to you directly, or even knowing you personally, is a conflict of interest.

Underwriter Abuse vs. Underwriters Just Doing Their Job

An underwriter might be called abusive or intrusive based on the questions they ask or how much information they request. However, they don't make the rules of their job.

For example, if you send in a document that says "one of five pages," but you left off the blank fifth page, a good underwriter should flag this behavior. They can't know what was on that last page and should ask you to correct and resubmit the paperwork. Yes, this is as annoying as it sounds (probably for you and for them).

All jokes aside, the role of an underwriter is essential and valid. They are there to protect the mortgage company from losing money, and to make sure you aren't buying more house than you can afford.

Things No Lender, Underwriter, Realtor, Seller, or Any Professional Can Ask You

Sometimes, the home-buying process forms may ask you about your identity, race, marital status, and income. This is different from a professional asking you a derogatory or discriminatory question.

If a real estate or mortgage professional asks you these things, you may have legal rights to take them to court over discrimination laws or the Fair Housing Act.

• "What is your gender identity?"
• "What race are you?"
• "How many people of this race live in your neighborhood?"
• "Are you planning to have children?"
• "What religion are you?"
• "Do you want a house near churches?"
• "What is your job?"
• "Do you want a family-friendly area or an adult community?"
• "Are you okay with this school district being diverse?"
• "Will your disability work with this home?"

Know your rights, and what a professional can and cannot ask you in the home buying process. Happy house hunting!

Related Resources:

• Fair Housing Act (FindLaw Learn About the Law)
• Mortgage and Loan Basics (FindLaw's Learn About the Law)
• What Is An Underwriter? (FindLaw's Learn About the Law)