Underwriting Loans and its implications
Loan underwriting meaning
Underwriting is the process of ensuring that the requested loan, the collateral you provide, and the documentation, all meet the requirements of your lender. Underwriters examine your credit score, income, and your repayment capacity to determine whether the loan you have asked for should be granted to you. This process protects the interests of all the parties involved.
The loan underwriting process timeline cannot be defined, as it may take anywhere between a single day to a couple of weeks. It depends on factors like how busy the lender is, how many of your documents need approval, and whether the underwriter knows what they are doing.
Home loan underwriting
A home loan is a loan provided to assist you in buying a home. If you apply for a home loan, the underwriter will determine the risk that their lender will bear by granting you the loan. If you apply for a Home Loan at Bajaj Finserv, you can avail of low interest rates.
The home loan underwriting guidelines include:
Income: Your income is reviewed to examine aspects like the type of work you do, the length of your employment, and your opportunity for advancement. The underwriter also inspects your source of income and determines the likelihood of it sustaining in the foreseeable future.
Debts and liabilities: The underwriter reviews your other debts and liabilities. The lender needs to know that you’ll have enough money to repay the loan even after clearing your other debts.
Credit Score: Your credit or CIBIL score is also reviewed by your underwriter to determine how likely you are to pay back the loan.
The home loan underwriting process further involves a series of steps taken by the underwriter after underwriting your loan:
First, the underwriter verifies all the information that you, as a borrower, have provided. For example, they’ll call your employer to find out if you actually work where you claim to work.
The lender gets the underwriter to ensure that the price of your property is comparable to the value of similar properties in the market. This is done so that they know that you’re not saving a large chunk of the loan by buying a cheaper home. This is called property appraisal.
The underwriter then takes a look at the legal history of your selected property. A lender may not want to lend you money to purchase a house that has any prior claims on it.
Once the underwriter is satisfied with the accumulated information, the loan is transferred to you.
Personal loan underwriting
A personal loan is usually smaller than a home loan, and is used to finance a car, home renovations, or even a vacation. The loan tenure can last anywhere between one to five years.
The personal loan underwriting guidelines are similar to those followed while underwriting a home loan, except for the fact that there is no property involved. If you want a Personal Loan with zero prepayment charges, opt for Bajaj Finserv.
When you apply for a loan, after the several documentation processes and inspections by the lender, the underwriter has the final say in deciding whether your loan application should be accepted. So, ensure that you have all the necessary documents ready and provide accurate information to the underwriters.