The Lo wortks for you they gather your info find the best program and bank and submit. The UW works for the bank and makes sure that you fit the guidelines based on what the Lo has submitted.
When you go into Underwriting, you're no longer really dealing with your Loan Officer much. You'll now be dealing with the Loan Processor, which is basically the Underwriter's aide/agent.
The way that it works, at least for FHA loans, is that the LO (loan officer) takes the information you give them and enters it into their system. The system tells them if it's approved or not, and if approved, with what conditions. This info gets passed along to the underwriting department, where they review the file and can add some additional conditions if they system didn't automatically detect/add them. The LP (loan processor) now contacts you to get those required conditions met. Once you submit the items they asked for, it goes to the UW (underwriter) to review it all and to either approve/deny/or ask for additional information.
As for what conditions they ask for, it really depends on each case. Examples of what we were asked for are:
Bank Statements for past two months for all accounts listed on mortgage application.
Copy of earnest deposit check and evidence that it cleared the bank (copy of bank statement showing it was cashed).
Letter of explanation as to an old address was showing on my credit report. (Was a previous address of mine from years back)
Copy of bankruptcy discharge paper showing discharge was at least 2 years ago.
Signed Form 4506-T (IRS tax return request, so they can get a copy of the tax returns directly from the IRS).
Copy of Social Security card.
Copy of federal issued ID.
Letter explaining a couple recent credit inquiries on my credit report.
Thats pretty much it. Had to get all that together and send it to them, and now they are reviewing it all. It's pretty straight forward, the part that sucks is waiting and waiting to hear back, especially if you are in a situation where you have to close in 30 days.
As for what do they look for on checking statements, they are looking for large non-income deposits and for NSF (insufficient funds) fees. Any large deposits have to be sourced, meaning you have to prove where they came from, there has to be a paper trail. You can't just say "Well, I had this cash under my mattress and decided to deposit it".