Underwriting
Underwriting is the process of evaluating a borrower's risk and deciding whether to approve a loan. It considers credit history, income, debt, and collateral.
Underwriting determines loan terms such as interest rate, limits, and repayment period. Automated and manual underwriting are both common in lending. Underwriters review loan-to-value ratios and issue pre-approval decisions.
Related Terms
Credit Score
A credit score is a numerical rating that represents a person's creditworthiness based on their cred...
Debt-to-Income
DTI
Debt-to-income ratio compares monthly debt payments to gross monthly income. Lenders use it to evalu...
Loan-to-Value
LTV
Loan-to-value ratio compares the loan amount to the value of the collateral. It measures how much of...
Collateral
Collateral is an asset that a borrower pledges to a lender as security for a loan. If the borrower d...
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