The job of a mortgage underwriter is to assess risk, monitor compliance with standards, and make a lending decision. The mortgage underwriter is the guardian of the regulatory compliance gate and also the keeper of the saleability standards. So, with compliance lenses on their eyes and saleability standards sitting in their heads, they will look at the following items:
COLLATERAL: The mortgage underwriter will carefully review the appraisal. Setting aside, saleability rules, the purpose of reviewing the appraisal is to see if the property - in the worst case scenario of a foreclosure - has sufficient value to recoup the lender's security interest.
CREDIT: The credit report provides two important components of a mortgage credit decision. The borrower's debt service is verified, giving the underwriter real numbers for debt to income ratio calculations, and the repayment history of obligations sets up a credit decision based upon a willingness to repay. Let me repeat that phrase, WILLINGNESS TO REPAY. I don't care if a borrower has the ability to repay if they demonstrate a lack of willingness to repay.
INCOME: Verification of income provides the mortgage underwriter with real figures for debt to income calculations plus the likelihood of the continuance of the income. Capability to repay combined with the stability of the income stream are key.
DEPOSITS: Ability to save demonstrates a responsible attitude and capability to live within one's means. Verification of the source of cash to close - if a borrower has hard earned savings at risk, they are less likely to allow a foreclosure. Are there cash reserves to fall back on in time of need? Deposit review is all about stability.
So, presuming the documentation is compliant and meets saleability standards, the underwriter will decide if the borrower is ABLE to repay, WILLING to repay, and if the worst case scenario happens, foreclosure, whether or not the lender buffered from a loss of market value.