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What is underwriting real estate?

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0 2022-06-14T08:54:32+00:00
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If you are familiar with loan procedures, I am sure you must have come across this term. Now what is the meaning of underwriting in real estate is something that I didn’t quite understand earlier. But when I applied for a home loan in 2017, I got to know what it meant and what does an underwriter do in real estate. Let me share what I know with you.

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Underwriting in real estate refers to the process where the loan application is scrutinised to gauge the level of risk in the investment and whether or not the loan should be approved. I asked my bank manager what the difference is between a lender and an underwriter. He said that underwriters are responsible to analyse what will be the appraisal value of the property. Is the loan request viable or not. A lender usually focuses mainly on the repayment capacity and finances of the borrower. 

Factors considered by real estate underwriters

I hope I have so far cleared up what is underwriting real estate. Please look at the list below to understand what factors are considered during underwriting process:

  • Rent growth potential of the property

  • Vacancy rate of the property

  • Cash flow forecast

  • Rate of return and estimated returns

I hope now you have a better clarity on what is the meaning of underwriting and what does an underwriter do in real estate.

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