What is Commercial Real Estate Underwriting?
What is Underwriting in Commercial Real Estate?
Underwriting is the process where lenders assess the risk of issuing a mortgage by evaluating a borrower's financial health and the property's value. This includes reviewing income, credit history, employment, existing debts, and conducting a property appraisal to ensure it serves as adequate collateral. Based on this assessment, underwriters decide whether to approve or deny the loan application and determine the loan terms.
- Evaluation: Underwriters evaluate the borrower’s financial information, including income, credit history, employment status, and existing debts, to determine their ability to repay the loan.
- Property Appraisal: The underwriter also assesses the property’s value through an appraisal to ensure it is worth the loan amount and that it serves as adequate collateral.
- Risk Assessment: By analyzing the borrower’s financial health and the property’s value, underwriters decide whether to approve or deny the loan application and under what terms (e.g., interest rate, loan amount).
Underwriting is a lender's process of reviewing a borrower's financial information and property value to assess the risk of issuing a mortgage loan and determining loan terms.