Loan Underwriting

Loan underwriting is the process by which a lender evaluates the risk of making a loan by reviewing the borrower, property, and loan terms.

• Determines whether a loan is approved, denied, or conditioned
• Focuses on risk assessment
• Applies standardized guidelines
• Protects the lender and investors

• Borrower
  • Credit history and credit score
  • Income and employment stability
  • Debt-to-income (DTI) ratio
  • Assets and reserves

• Property
  • Appraised value
  • Condition and marketability
  • Location and use

• Loan
  • Loan-to-value (LTV) ratio
  • Interest rate and term
  • Loan type and guidelines

• Loan-to-Value (LTV) = Loan Amount ÷ Property Value
• Debt-to-Income (DTI) = Monthly Debt ÷ Gross Monthly Income

• Approval
• Conditional approval
• Suspension or denial

• Underwriting evaluates ability and willingness to repay
• Lenders rely on the lower of purchase price or appraised value