Glossary
Underwriting
The process a lender uses to verify your income, assets, debts, and credit before approving a loan — the "yes or no" behind every offer.
Underwriting is where a lender checks whether the loan file matches reality: verifying income with pay stubs or tax returns, confirming assets, pulling credit, and calculating your debt-to-income ratio against the loan you're requesting. Automated underwriting handles most straightforward files in minutes; anything with self-employment income, credit blemishes, or a high loan amount often gets routed to manual underwriting, which takes longer and asks for more documentation. A pre-approval is a preliminary read; full underwriting is the final check before closing.
Related terms
- Origination fee An upfront charge (0–8% of the loan) deducted before funds reach you. A $10,000 loan with a 5% fee delivers $9,500 — but you repay all $10,000.
- Charge-off When a creditor gives up trying to collect a debt through normal billing and writes it off as a loss — typically after 180 days of non-payment.
- Escrow A holding account your servicer uses to collect and pay property taxes and insurance alongside your mortgage payment.
- Loan-to-value ratio The loan amount divided by the property's value, expressed as a percentage — a core number in mortgage and home-equity underwriting.
- Bridge loan A short-term loan that "bridges" a gap — most often financing a new home purchase before your current home sells.
- Promissory note The legal document where you promise to repay a loan under specific terms — amount, rate, schedule, and what happens on default.