What does underwriting involve in mortgage lending?

Underwriting in mortgage lending is fundamentally about evaluating borrower risk and determining whether to approve a loan application based on a borrower's financial profile and the specifics of the loan request. This process includes a thorough review of the borrower's credit history, income, assets, employment status, and the details of the property being financed.

The underwriter assesses this information to gauge the likelihood that the borrower will be able to repay the loan, thus mitigating risk for the lender. This includes examining debt-to-income ratios, credit scores, and other relevant financial metrics. By conducting this thorough assessment, underwriters help lending institutions avoid defaults by ensuring that loans are made to borrowers who can afford to repay them under the terms of the mortgage.

The other options—like setting interest rates, marketing loan products, and negotiating property prices—do not pertain directly to the underwriting function. Interest rate setting is often determined by market conditions and lender policies, marketing is about promoting loan offerings, and property price negotiations are typically part of the real estate transaction process rather than the underwriting phase.