Getting approved for loans is an extensive process. There are well-defined screening criteria and lots of documentation to be filled in. You’re required to submit proof of your financial standing and your credit reports. Above all, there’s an underwriter sitting behind a desk who analyzes your risk position.
But none of this is anything to worry about. If you’ve contacted the right private lender, the underwriter can make the process simple and hassle-free for you.
Confused? Here’s what they do and how they might help you:
What is an underwriter?
Whenever someone applies for a loan, there are three parties involved primarily:
- The applicant
- The lending individual or the financial institution
- The underwriter who is usually employed by the institution.
The underwriter is the party that works on behalf of the lender and determines whether it’s worth it for the lender to assume the risk associated with the loan. They assess and evaluate the risk associated with the loan in detail and tell the company whether the loans or the policies are working out for them. They’re known as the risk experts of the financial world and usually perform these services for some sort of fee or commission.
Underwriters are more commonly needed in the insurance industry, mortgage industry, equity markets, and markets where debt security trading takes place.
Are there different types of underwriters?
Yes, there are. Here are some of the most common categories of underwriters, according to their job functions:
These are the underwriters hired by banks to assess risks for loan applicants. They don’t just analyze loans given out to individuals but also to big corporations and businesses. They also advise the lender on how likely it is for the loan applicant to pay back the amount and what would be an ideal rate.
Buying a house is quite a risky task in itself—even if you have a decent stream of income and a good credit score. What makes mortgage loans riskier than conventional loans is the amount loaned. Most mortgage loans that are given out are above six figures; hence they require greater consideration. Since mortgage lenders can’t always manage that kind of risk analysis, they outsource the task to underwriters.
A mortgage underwriter takes a lot into account other than just the credit history. This includes the debt that you have compared to the income, verifiable proof of income, and how accurately the property was appraised. This is to make sure that the home is worth the loan amount and the purchase price that the loan applicant will pay.
An insurance underwriter analyzes whether the insurance policy you’re seeking is risky. Whether you’re applying for life insurance, health insurance, casualty insurance, or auto insurance—you’ll be dealing with a specialized underwriter who has experience in the respective field. Other than analyzing risk, the underwriter also determines whether you qualify for the policy at all. They might also determine what kind of policy you’re entitled to and what it will cover.
Global Capital Partners Fund LLC is a leading provider of hard money loans in Philadelphia, Miami, and Atlanta. They’re also home to a team of highly experienced underwriters. Get in touch with their team now.