What does it mean to "underwrite" a loan?

Underwriting a loan primarily involves a comprehensive evaluation of a borrower’s financial information to assess their ability to repay the loan. This process includes reviewing credit history, income verification, debt-to-income ratio, employment status, and other financial indicators. The underwriter’s goal is to determine the risk associated with lending to the borrower and to ensure that the loan adheres to the lender's guidelines as well as regulatory requirements.

This critical step in the mortgage process ensures that the lender is making informed decisions based on the borrower’s financial stability and capacity. By thoroughly analyzing this information, underwriters play a key role in maintaining the integrity of the lending process and minimizing the potential for defaults.