What you ought to know (#14)

When a loan application has gone to "underwriting", what does that mean?

Underwriting refers to the process that a lender uses to assess the process of providing access to their loans. According to Wikipedia, "the name derives from the Lloyd's of London insurance market in London. Financial bankers, who would accept some of the risk on a given venture (historically a sea voyage with associated risks of shipwreck) in exchange for a premium, would literally write their names under the risk information which was written on a Lloyd's slip created for this purpose".

In lending, underwriting is the detailed credit analysis preceding the granting of a loan, based on credit information furnished by the borrower, such as employment history, salary, and financial statements; publicly available information, such as the borrower's credit history, which is detailed in a credit report; and the lender's evaluation of the borrower's credit needs and ability to pay. If the underwriter doesn´t have a clear picture of the situation, then the loan may be held up, or in some cases, denied.

In most cases, the underwriter will supply a list of conditions that must be met both prior to loan documents being released, and before loan funding may occur.

In many cases, Automatic Underwriting Services (AUS) are used to "score" loan applications, based on a number of evaluation formulas. These services streamline and speed up the review, and approval process.

Bottom-line...to make sure there are no issues in underwriting, your loan application must be packaged properly, and any issues be addressed upfront. To ensure a smooth process, call us at Arrowhead Home Loans.

***If you have a question you´d like answered, please let me know.***