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Underwriting Process

In the financial sector an underwriter is an important entity that helps the companies to introduce the future risks, analyzes, assumes and evaluate the information provided by the borrower to understand and assess the minimum loan criteria.A credit manager is a qualified professional employed by the Bank/ NBFC to handle the credit department and make decisions as per the concerned credit limits, analyze the levels of risk and clearly discuss the terms of payments with their clients. The credit manager and his team members are also called underwriters. Underwriter’s job profile involves the scrutiny of the proposals, regulation of policy terms and premium calculation based on actuarial, background and statistical data. As the profile is responsible to determine the ‘risks’ and involves complex processes. Sensible judgment and diligent attention is required to ensure competitive and accurate quotes are produced for the customer, yet profitable to the company. To be a good underwriter one has to possess Analytic skills, Good math and statistical skills, IT skills, Attention to detail, Verbal and written communication skills, Good judgment, Negotiation and interpersonal skills. Underwriters operate in different aspects of the financial sector, but primarily the common debt agents are the underwriter who underwrites different types of loans like Loan Against Property (LAP) and Home loans, secured & unsecured Loans and many others. Risk & terms that are considered by the underwriters fall into 3C’s Category – Credit, Capacity & Collateral.


The experienced underwriting team review each case to assess the borrower’s capacity, capability and intention in making their future payments based on both the present comfort to bear the debts and the past financial credentials. This means that only those applications are approved where it shows that proposed loan EMI is bearable, based on the applicant’s income and expenses, for the complete term of the loan, and that the applicant has a good RTR ( repayment track record) or strong balanced credit record in the past. If the consumer is a FTB (first time buyer) a FI / Bank will also look into whether the loan applicant or the borrower is able to serve the EMI or not as he is not in habit of paying EMI on a regular basis. (Know about the factor effecting the loan EMI)

Know the Customer

An underwriter reviews everything about the client. This begins with the initial information provided by the applicant on the application form. The key characteristics to be reviewed are

  • Age
  • Employment status
  • Income
  • Staying period in the current property
  • Residential status
  • Contact details
  • KYC Details (Know more about KYC)
  • Business Name & address
  • Individual Name & address
  • References (by trade or personal)
  • Loan purpose & amount and
  • Earning members of the family…

Credit Search

To ensure a strong credibility underwriters use electronic identification procedures by connecting directly to credit reference agencies, to verify about the borrower’s track records. Currently there are various credit research & rating agencies available in the market that maintain the financial aspect of each and every individual w.r.t. their financial transactions like CIBIL, Equifax, NCIF etc. CIBIL is one of the most common rating agency which is being used by the Banks/ FI’s and even the consumers itself to keep a record of their credit worthiness.

The credit search report gives the clear picture of your payment history as a regular payer, defaults or irregular payments. Positive or negative track record affects the loan application of the borrower. key credit data such as mortgages, loans, credit cards and bank overdraft records are also verified.

The Financials

Financial is a broad term that includes

  • Bank Statements (saving & current account)
  • SOA (Statement Of Account – statement for the running loans or recently closed),
  • ITR
  • Trading P/L Account & Balance Sheet

Bank statements also give the confirmation on the following information:

  • Your full name and address
  • Salary credits and the regularity of the amount and the period
  • Use of authorized/ unauthorized credit limits (CC & OD limits)
  • General transaction history and regular payments made
  • Outgoing day-to-day costs, ongoing obligations and spending habits
  • Any recent unpaid or reversed transactions
  • Any bounced cheques
  • Payments made on month on month basis
  • Maintenance of the sufficient balance on EOM or 10th of every month
  • Number of Debits & Credits (Know about smarter ways to use plastic money)
  • Average churning

Each loan application is carefully underwritten by the underwriters. Loan application is being rejected if the client is not found to be creditworthy. Thus, underwriters make the final decision to approve or decline the application request.


Borrower’s ability to repay the loan refers to the Capacity of the borrower. The regularity of income is determined by the borrower’s salary or the regular income. Self employed borrowers have to face more risks as compared to the salaried due to the solely responsible person to look after the liabilities as well as the personal responsibilities. Direct income is also influenced with the unstable sources of income like commission income. To make sure about the capacity debts, income as well as cash reserves are verified. Documents for the income proof also differ based on the type of income.

The Calculation

Once the verification of the income, payments and credit history is done, a mathematical formula is used to calculate eligibility score and creditworthiness score. As a responsible entity of the lender the underwriter ensures that each loan is affordable and sustainable for the full term.

The calculations are evaluated as follows:

The value of total debt outstanding. Whether it will sustain and reasonable enough in comparison to the annual net income?

Loan eligibility is based on the compulsory financial obligations, including the previous active loans, compared against the income?

Is there sufficient amount left with the borrower after all recurring and living expenses are taken care of?

The underwriter shall ask for the further information from the customer, like pay slips – if the net income is variable and cannot be verified. Underwriters may also ask for more acute clarifications of the details provided in the applicant’s documents.

Loan Cost & the Risk Involved

For a Bank / NBFC underwriter creates a risk model to determine the price of a loan for each individual applicant based on the data and information provided to understand the ability and the capability to repay the loan. Various key features are also kept in mind before taking the process further.

Applicants who display momentary signs like staying on rent over the past few years at different addresses, is little risky and therefore the loan cost will be higher or may be even loan can get rejected. On the other hand, if the house is owned then the risk of default is lower, and therefore loan cost will likely to be lower.

Assets are also a part of capacity evaluation. Borrowers who have sufficient liquid assets are more likely to have lesser defaults. Borrowers also need to provide an explanation if they have received some sort of gift for the down payment to buy an asset. Borrowers have to keep a reserve to pay the loan EMI as well as other liabilities on time in case of any interruption of the employment.

  • Eligibility

Individuals can apply for the loan, either solely or with a co-applicant (joint loan). Owners of the current property, in respect of which the loan is being sought, will have to be a part of the loan structure. However, the co-applicants need not be co-owners. Specific eligibility criteria are as follows:

For self-employed professionals:

Minimum annual income should be Rs. 1.44 lakh as per the P&L.

Minimum 21 years of age.

Maximum 65 years of age at the time of loan maturity.

Firm/company should be operative atleast for the last 3 years.

Firm/company should be making cash profits for the last two years.

For self-employed non-professionals:

Minimum annual income should be Rs. 1.44 lakh as per the P&L.

Minimum 21 years of age.

Maximum 65 years of age at the time of loan maturity.

Firm/company should be operative atleast for the last 3 years.

Firm/company should be making cash profits for the last two years.

Variants of Loan against Property –
A) Loan Against Residential Property/ Plot
B) Loan Against Commercial Property/ Plot

Specifically, the credit manager take a close look at the DTI (Debt to Income) ratio to ensure that the borrower have enough money in hand to bear the extra burden of mortgage EMI along with the current obligations. They just want to be assured that even with any uncertain situations like interrupted employment or any serious illness will not affect the repayment.


Collateral is the property that has to be financed. Lenders are responsible to evaluate the value and type of the property. It is important that underwriter confirms that the value of the property is not lower than the loan amount. If the borrower owes debts more than the property value, it will be difficult for the lender to recover the unpaid balance of the loan (in case if the borrower turns defaulter). To know the value of the property, the lenders get an appraisal report to get the accurate value of the property.

For example: if the borrower borrows a loan to purchase a car then the car becomes the collateral. If the loan is not repaid as per the agreed terms and conditions, the Bank/ NBFC will repossess the car or take back the property.


Some home loan or mortgages are very easy to underwrite and some are vice versa that can be challenging. Don’t be in stress due to imperfect picture of your financials. The mortgage officer (sales professional), underwriter and processor is working as a team to find a strategy that suits your financial position. Credit issues can be possibly solved with a strong income, a handsome down payment or few significant savings. A good credit score and a big size salary amount can help to lower the down payment.


Home Loan    Loan Against Property    balance-transfer    Business Loan    Personal Loan

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