Loan underwriters are individuals or businesses that evaluate and ultimately approve or reject a loan request submitted by an applicant. As part of the process, the person verifies the data provided by the potential debtor, including his or her employment information, references, and other data requested. Normally, underwriting also involves running credit checks on the applicant. Once the underwriter is satisfied that the applicant is a worthy credit risk, the loan is granted.
Commercial loan underwriting takes place with many types of loans, although the exact process will vary based on factors such as the nature of the loan and current regulations that apply in the jurisdiction where the transaction is taking place. In any situation, the purpose of the underwriter is to determine if the amount of risk associated with a client is low enough to grant the loan. Some will only consider clients with a high credit rating and stable employment, while others may qualify applicants with less than perfect credit for a loan, but at a higher rate of interest.
There are a number of different underwriting jobs in addition to commercial ones. Commercial jobs typically involve the evaluation of loan applications connected with businesses. In this scenario, the underwriter is not investigating an individual’s credit worthiness, but the financial reputation of the company. This will mean looking at the company’s market share, current debt load, profit margin, and cash flow.
Loan underwriting is also part of the process required to approve a mortgage application. In this case, the individual will consider such key factors as the past credit history of the applicant, current credit ratings, and the amount of outstanding credit already available to the person. In addition, the salary and wages of the applicant are also considered very important. It is not unusual for an underwriter to also be interested in how long the applicant has been with his or her current employer.
Underwriting loans helps financial institutions to qualify applicants, making sure they meet the minimum standards for approval that are set in place by the institution. Those standards will vary, with banks usually having the most stringent requirements. Finance companies that specialize in high-risk loans will have broader criteria that the underwriter will use to evaluate the loan, and payday loan companies usually have the broadest standards. It is not unusual for any underwriter to have specific loan officers or others who are authorized to research and evaluate each application before approving or rejecting the request.
