Mortgage Underwriting

Mortgage underwriting is the lender's review of the borrower, the property and the loan terms to decide whether to approve the loan. The refinance step of BRRRR succeeds or fails in underwriting, where the appraisal, rent, credit and ownership history all get checked.

Conventional lenders look at the borrower's income, debts, credit score and reserves. Investor loans built around the rental measure whether its rent covers the new payment, usually expressed as a debt service coverage ratio. Both require an appraisal that supports the loan amount.

Many lenders also have a seasoning rule on cash-out refinances: a minimum time owning the property before they will lend on the appraised value instead of the purchase price. Periods vary by lender and loan program, so confirming them before buying keeps the refinance from arriving months later than planned.

Further reading: Mortgage Underwriting on Wikipedia.