Underwater is one word when it is an adjective preceding the noun it modifies. When it follows what it modifies, it is usually one word (e.g., his head was underwater), but underwater is still a fairly new compound—only about a century old—and is not 100% accepted, so some publishers still use under water when it follows what it modifies (e.g., his head was under water). This practice is becoming less common, though, and you are safe with the one-word spelling for all uses of the word.
Their underwater beauty and sea life draw thousands of people to the waters every year. [Globe and Mail]
Millions of Americans remain underwater on mortgage loans. [New York Times]
High-quality rum, though, such as the local Seven Fathoms, aged underwater in oak barrels, is best savoured slowly. [Guardian]