Underwriting is the process that mortgage lenders use to determine the risk of making a loan to a borrower.

An underwriter will evaluate the borrower’s loan application based on the lender’s current lending guidelines. They will assess the borrower’s credit, capacity and collateral. Credit is the borrower’s history of paying other bills on time and not over-extending themselves. Capacity is the borrower’s source of income and ability to make recurring loan payments. In the case of real estate, the collateral is the house being loaned on. Underwriters will confirm that the home appraises for the purchase price and conforms to the proper property type and occupancy.