After your loan application is submitted, who decides if you get approved for the loan?
a. credit agency
b. credit bureau
c. FICO
d. collections agency
e. loan underwriter
I pick e.
Correct!
People with a higher credit score typically pay _________ interest rates when borrowing money which _________ the cost of borrowing.
a. lower, increases
b. higher, increases,
c. lower, decreases
d. higher decreases
e. lower, doesn't effect
I pick e.
I disagree. Not e.
c. it would lower the interest rates and decreases the cost of borrowing
Yes, c.
Great choice! The entity that decides whether you get approved for a loan after your application is submitted is the loan underwriter. They play a crucial role in the loan approval process.
To understand the role of a loan underwriter, let's dive into the process:
1. Loan Application: First, you submit your loan application to the lender, providing them with your personal and financial information.
2. Documentation Review: The loan underwriter reviews all the documentation you've submitted, including your income statements, credit history, employment details, and other relevant information.
3. Risk Assessment: The underwriter assesses the risk associated with lending you the money. They evaluate your creditworthiness, considering factors such as credit score, payment history, outstanding debts, and any existing financial obligations.
4. Verification: The underwriter verifies the accuracy of the information you provided during the application process. This may involve contacting your employer to verify your employment status and income or requesting additional documentation for clarification.
5. Guidelines & Policies: The underwriter follows specific guidelines and policies set by the lender or financial institution within which they are employed. These guidelines dictate the minimum credit score, debt-to-income ratio, and other criteria required for loan approval.
6. Decision Making: Based on the risk assessment, verification process, and adherence to guidelines, the underwriter ultimately decides whether to approve or deny your loan application.
7. Conditions & Terms: If approved, the underwriter may attach certain conditions or specific terms to the loan, such as interest rate, repayment schedule, or collateral requirements.
It's important to note that while the loan underwriter holds significant decision-making authority, they may also collaborate with other departments during the approval process, such as credit agencies, bureaus like FICO, or even collections agencies (if there are outstanding debts).
Hope this explanation helps!