What is Underwriting?


Once a loan goes through the loan processor, it is handed off to an underwriter. During the mortgage underwriting process, an underwriter will ensure that your financial profile matches the guidelines of the lender and the loan. Ultimately, the underwriter makes the final decision on whether to approve or deny your loan request.

What does an underwriter do?

The main task of an underwriter is to assess the risk associated with a borrower. An underwriter will look at things such as declarations of bankruptcy, foreclosure, if you have paid your bills on time, and your credit score to see how you manage debt. This will help them determine your ability to make your mortgage payments.

The three C’s of underwriting: Credit, Capacity, and Collateral

Underwriters use these three C’s to determine the risk associated with a borrower.


An underwriter will look at your repayment and credit history. Credit is one of the most important aspects of the loan approval process. Your credit report will show how you have handled your past bills. This will also help the underwriter predict your ability to make your mortgage payments on time and in full.


Underwriters will analyze a borrower’s employment, income, debt, and asset statements to ensure you have the means to pay off your debts. They will take a close look at your debt-to-income ratio to see that you have enough money to cover your current debts and your new mortgage. In addition to looking at the above statements, an underwriter will also review your savings and checking accounts, your 401(k), and your IRA accounts. This is because an underwriter wants to ensure that if something happens, such as illness or a loss of job, you are still able to pay your mortgage.


Collateral refers to the value and type of property being financed. The underwriter wants to make sure that the loan amount does not exceed a property’s value. This is because, in the case of default, a lender may not be able to recover the loan’s unpaid balance. To correct asses the property’s value, an underwriter will order a home appraisal, which will assess the home’s worth. The property type is also important to the underwriter. Lenders assume that borrowers are more likely to walk away from an investment property than they would from a primary residence.


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