Underwriters

What is an Underwriter?

In credit terms, Underwriters are the people who subjectively assess your application. They will examine the risk involved with lending to you, and whether they are willing to accept this level of risk before granting or declining your credit application.

In some circumstances Underwriters also have the power to ‘price for risk’ so you may be offered a higher interest rate than the typical APR if your application is deemed to be more risky than the average. Most lenders now assess risk using an automated credit scoring procedure, but several lenders still manually examine all new applications in order to make a lending decision.

An Underwriter will look at the prospective customer’s creditworthiness to see how well they have managed credit in the past, as well as the lender’s capacity to repay the loan (known as affordability).

When looking at the customer’s ability to repay the loan, income details, stability of income or employment and the current level of indebtedness will be considered. In the case of secured loans or mortgages, the value of the property or collateral will also be examined and a valuation of the property is generally required before a mortgage is granted.


Q: Can an Underwriter deny my loan?

A: Yes. If they deem that you are too risky a prospect to give credit to, they can deny your loan or mortgage provided they see sufficient reason on your application to do so.

Q: How do they assess my affordability?

A: Underwriters check your regular monthly outgoings compared to your income and assess whether they deem it likely you will be able to afford to make their repayments on top of your other commitments. Mortgage applications often ask for more detailed information than most loan or finance applications, with expenditures such as fuel and food costs often needing to be estimated as well.

Mortgage underwriters will often ‘stress test’ your income as well, meaning they want to make sure you’ll have enough money left after paying your mortgage to cope with any unforeseen circumstances that aren’t usually factored into monthly bills.

Q: What qualifications are needed?

A: Any financial or legal qualifications are considered an advantage for people looking to start a career as an underwriter, with a background in insurance preferred. The role itself heavily relies on analytics and data handling.

Jargon Buster

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