finance
underwriting
Underwriting is the lender's process of evaluating the risk of making a loan. The underwriter reviews the borrower's credit history, income, employment, assets, and debt-to-income ratios, along with the property's appraisal and title, to decide whether to approve the loan and on what terms. Underwriting may result in approval, conditional approval with requests for more documents, or denial. Automated systems often perform an initial review.
- Exam tip
- Underwriting evaluates both borrower and collateral. Lenders cannot use protected characteristics in underwriting under the Equal Credit Opportunity Act.
- Example
- An underwriter approves a loan on condition that the borrower provides two more months of bank statements and a letter explaining a credit inquiry.
Related terms & state variants
Sources
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Last verified: 2026-10-23