Function
- After you fill out an application, the loan company has an underwriter analyze your credit history and financial situation. The underwriter also evaluates the condition and value of collateral used to secure the loan.
Significance
- Underwriting, a normal part of the loan-approval process, protects the borrower and the lender. An underwriter may decide that a certain program or interest rate fits your situation better. She also determines what kind of credit risk you represent for the company she represents and whether or not it should grant the loan.
Considerations
- Student loans, business loans and residential and commercial property loans go through the underwriting process. The Equal Credit Opportunity and Fair Credit Reporting Act impacts the practices used in the underwriting process. The rules under these acts ensure that you get a fair chance at securing a loan.
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