PERSONAL LOAN UNDERWRITER: General Overview and Job Description


It might be stressful to receive approval for a loan, insurance, or mortgage. To be sure that the financial risk the company is going to take is worthwhile, your application must go through a rigorous process. A personal loan underwriter can help in this situation. For the approval of your financial services, underwriters serve as gatekeepers. Keep reading to learn about what a personal loan underwriter does, how often an underwriter denies a loan, and the loan underwriting process.

One of the most crucial jobs in the financial sector is underwriting, which is mostly done by insurance, lending, and investment firms. Based on your level of risk, an underwriter assesses your financial standing and determines whether to accept your contract.

What Is an Underwriter?

An underwriter is a person or entity that assesses the financial standing of another party and takes on the risk in exchange for a fee. Typically, an underwriter is compensated with a premium, a commission, or a combination of a premium and a commission.

If you’re working with an underwriter, you’re probably trying to acquire consent for a significant transaction in one of many sectors, such as mortgages, insurance, loans, or equities markets. Some underwriters specialize in particular disciplines for each industry.

What Does a Personal Loan Underwriter Do?

An underwriter is employed in the loan and insurance sectors. Making crucial decisions about whether to approve applicants for policies or financing is his primary responsibility. According to the U.S. Bureau of Labor Statistics, working as an insurance underwriter and a business and personal-loan underwriter often require postsecondary degrees and is highly regulated by state law. In many states, underwriters must have a current, renewable license to maintain their employment status.

Personal Loan Underwriter Job Description

Credit Underwriter

Personal loan underwriters, often known as loan officers, consider loan applications and decide whether to approve a borrower for finance. Loan applicants will meet with a personal loan underwriter to discuss personal and financial data important to the decision-making process.

Helping candidates understand the many loan kinds and their payback periods is part of the job description for a credit underwriter. The financial portfolio of a loan application is next assessed and analyzed by underwriters, who then decide whether to lend money or not. You have the option of working as an underwriter for personal, business, or mortgage loans.

Becoming a Personal Loan Underwriter

Many underwriters of personal loans hold bachelor’s degrees in finance, business, or economics. Senior staff employees of the lending institution train them on the job when they are hired.

Loan underwriters are required to keep a mortgage loan originator license in each of the 50 states. This involves, according to Hondros College, 20 hours of coursework and passing a written test. Every year, underwriters are required to submit fingerprints, background checks, and credit reviews.

Job Description for an Insurance Underwriter

The choice of whether to approve insurance policies is made with the help of an insurance underwriter. To ascertain whether it is in the company’s best financial interest to issue a policy, the underwriter will conduct a risk analysis after receiving an applicant’s information for insurance.

Understanding underwriting software created to support the risk assessment process is necessary for this. An insurance underwriter may also suggest premium levels and the scope of coverage if an application is accepted.

Becoming an Insurance Underwriter

The BLS reports that the majority of insurers prefer an underwriter to possess a bachelor’s degree in business or finance. However, if a candidate has prior underwriting expertise, businesses will also consider hiring someone with a bachelor’s in an unrelated discipline. Insurance underwriters must get and maintain accreditation in their industry, according to employers.

For new underwriters in need of an Associate in Commercial Underwriting or an Associate in Personal Insurance, the Insurance Institute of America offers training programs. Medical underwriters are underwriters who make choices about health insurance.

Personal Loan Underwriter Outlook and Salary

For positions as an insurance underwriter as of 2020, the BLS reported median salaries of $71,790, while for jobs as a loan underwriter, they were $63,960. The career opportunities for different types of underwriters slightly vary. Personal loan underwriter occupations aren’t likely to change significantly between 2020 and 2030, however jobs as insurance underwriters are predicted to fall by 2%.

How Often Does an Underwriter Deny a Loan?

How many applicants are turned down for funding? The Consumer Financial Protection Bureau estimates that in 2020, 13.2% of requests to refinance a home are turned down, compared to 9.3% of requests to purchase a new home.

Once more, let’s be realistic. Banks, other lenders, and real estate brokers are aware that individuals pay costs when applying for a mortgage. Before beginning the procedure, they want to be sure that the prospective buyer will be accepted. Given that they are paying mortgage application fees, the buyer also wants this.

Five Grounds for Loan Denial by a Personal Loan Underwriter

Credit problems are a frequent cause of mortgage denials, but they’re not the only ones. Here are a few more issues that could make it difficult for you to purchase a home.

#1. Insufficient credit

You’ll probably get rejected if your credit report isn’t substantial. Starting to establish your credit history will help you to resolve this problem by giving your lender a better understanding of how you handle credit and debt. They want to be sure you can repay it responsibly. In addition to showing your lender that you’re serious about purchasing a home, improving your credit score can make it simpler for you to obtain other loans in the future.

#2. Insufficient income

Additionally, if your income is insufficient, you risk being rejected. To make sure you have enough money each month to pay both your house payment and any other debt you might have, lenders will assess your debt-to-income ratio (DTI). You won’t be accepted if your DTI is too high or your income is insufficient to demonstrate that you can make the required monthly payments.

#3. A change in job

It’s also possible to be rejected if you recently started a new job. Lenders prefer consistent employment and income. They might be concerned that you won’t have the same income possibilities with new work, which could make them question if you’ll be able to pay back your mortgage. Although it’s not necessary, most lenders prefer you’ve worked for the same company, or in a job quite similar to yours, for at least two years.

#4. An unexplained cash deposit

What may go wrong if you have too much money? A mortgage lender can be concerned if they see a recent large cash deposit that you received as a gift and may have to repay it. To feel completely comfortable lending you money, they’ll want to know the source of any money.

#5. Issues with inspection

Your mortgage loan application can be rejected if a significant problem is discovered during your home inspection. If during the appraisal process the lender determines that the home is a poor investment, the loan will likely be rejected. Although it’s not a wonderful feeling to have your loan denied, it might be the best-case scenario — you don’t want to acquire a home laden with problems in need of fixing.

What to Do If Underwriting Rejects Your Mortgage Loan

Don’t give up on getting a mortgage if you were rejected. You can take a few steps right away to strengthen your application for when you’re ready to reapply.

#1. Consult your lender

Going back to the source is the first step. Your lender is likely to be the person who can tell you why your mortgage application was rejected. And according to the Equal Credit Opportunity Act, lenders are required to notify you why you’ve been turned down if credit plays a part. They must provide a statement outlining the specifics and naming the credit reporting company that provided the data they used.

#2. Pay attention to your credit

Trying to purchase a property with terrible credit but not new to credit? Monitoring your credit is the greatest approach to start the process of repairing it. Regularly check your credit report and score; you can do this for free through several online sources. If you want to raise your credit score, you should keep track of your monthly debt payments and credit usage.

#3. Check your credit report for errors

There will inevitably be occasional errors due to the credit bureaus and creditors involved in creating your credit report. These mistakes are very difficult to correct and might damage your credit score.

#4. Reduce and restructure your debt

Paying off any debts and collections that are reflected on your credit report is one of the best strategies to raise your credit score. Try to negotiate a deal with creditors to pay what you can, which will appear on your credit record as “paid as agreed,” if it’s unrealistic for you to pay off the entire sum. Even if it won’t improve your credit score as much as paying off the debt entirely, making a payment is still preferable to doing nothing.

Loan Underwriting Process

The underwriting procedure can take a while. Although each lender has slightly different procedures and methodologies, the following five steps constitute the underwriting process:

#1. Obtaining prior approval

Your very first step—even before you start looking for a home—is to get pre-approved for a mortgage. A lender will examine your financial details, including your income and debts, as well as the results of a credit check, to decide whether you are preapproved.

Remember that obtaining prequalification and obtaining preapproval are two distinct processes. In general, a preapproval is a statement from a lender that, assuming nothing changes in your financial condition, you will be authorized for a specific amount of money.

#2. Verification of assets and income

Be ready to give further financial proof, such as tax returns and bank account statements, and to have your income validated. Money in your bank accounts, retirement funds, investment accounts, the cash value of life insurance policies, and ownership stakes in companies where you have assets in the form of stock or retirement accounts are all assets that will be taken into account.

#3. Appraisal

A lender will have the property appraised once you have located a home that you like and that is within your price range. This is done to determine whether the sum you offered to pay is reasonable given the state of the house and similar properties in the area. Depending on the complexity and size of the home, an appraisal for a single-family home might cost anywhere from a few hundred dollars to over a thousand dollars.

#4. Title search and title insurance

A lender won’t provide financing for a home that is the subject of pending judicial proceedings. To ensure that the property may be transferred, a title company conducts a title search.

The title company will investigate the property’s past, looking for mortgages, claims, liens, easement rights, zoning regulations, ongoing legal disputes, unpaid taxes, and restrictive covenants. After that, the title insurer issues an insurance policy that ensures the validity of its investigation.

#5. Underwriting decision

The ideal result would be for you to be approved for a mortgage after the personal loan underwriter has carefully reviewed your application. You are now free to move forward with the closing on the property.

However, you might instead be given one of these choices:


If your mortgage application is rejected, you’ll need to know the precise reason why to decide what to do next. Paying off credit card balances may help you lower your DTI ratio if the lender believes you have too much debt. If your credit score wasn’t selected, check your credit report again for errors and take action to raise it. You can try reapplying in a few months, applying for a reduced loan amount, or making a higher down payment to make up for it.


This could indicate that the underwriter for your loan is unable to assess your application because some required evidence is missing. If the personal loan underwriter, for instance, was unable to confirm your work or income, your application can be put on hold. If you may restart your application by supplying new information, the lender needs to let you know.

Approved with restrictions

Mortgage approvals may be subject to requirements, such as the need to submit additional pay stubs, tax documents, evidence of insurance coverage, proof of mortgage insurance, or a copy of a marriage certificate, divorce decree, or company license.

Your property purchase will be practically finished after all conditions are met, and your mortgage application is accepted. Closing day is the last phase when the lender funds your loan and pays the seller in exchange for the property’s title. You will sign the last piece of paper at this point, pay any closing expenses that are owed, and get the keys to your new house.

How Long Does Underwriting Take?

According to Ellie Mae (short for Electronic Mortgage Affiliates), as of March 2021, it took roughly 52 days from the time your application was received until the loan was disbursed. VA loans typically take about 57 days, compared to about 55 days for FHA loans.


You might require a personal underwriter if you’re looking for approval for a financial service, such as a mortgage, loan, or insurance. A personal underwriter will evaluate your present financial status to establish an acceptable level of risk by the particular needs of the business. To avoid problems in the future, talk to your agent, broker, or company about the underwriting process to gain a better understanding of how it works.

Frequently Asked Questions

What is an underwriter for a personal loan?

The process through which the lender determines whether a borrower is creditworthy and deserving of a loan is known as underwriting. The key to a favorable portfolio quality is an efficient underwriting and loan approval procedure, and one of the main responsibilities of the function is to minimize unnecessary risks.

Do underwriters want to approve loans?

Your application for a mortgage loan will be approved or rejected by an underwriter based on your credit history, job history, assets, debts, and other considerations. It all depends on whether the underwriter thinks you can pay back the loan you seek. Numerous frequent issues might arise during this step of the loan application procedure.

What should you not do during underwriting?

During underwriting, don’t make any new credit line applications. During the underwriting process, any significant monetary adjustments or expenditures may result in issues. Loans or new credit lines could stop this trend in its tracks. Additionally, stay away from any acquisitions that can reduce your assets.

What is considered a red flag in a loan application?

High-Interest Rate: The High-Interest Rate is the most glaring indication that you are getting a personal loan from the incorrect lender. Since personal loans have the highest interest rates when compared to other forms of loans, this is the main determining factor when selecting the lender.

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