by Silas Reed
Underwriting is the method used by evaluators to evaluate the eligibility of customers to receive a particular financial instrument. One such instrument is mortgages for home and business property. Whenever a bank or any institution decides to grant security to the borrower, there are two things: first the lender believes in the project the borrower wishes to finance and second, the lender anticipates a return from the project at some point later.
This evaluation is done by a bank underwriter. Whenever there is an application for a bank loan, first the bank underwriter checks the credit history of the applicant. Evaluation includes checking if the applicant has previously been granted a loan. If granted then they will be able to repay the amount in time.
What is the purpose of the bank loan? What is the risk involved in granting the loan to the burrower. For the purpose of loan underwriting. the underwriter may access various details of the individual which may typically involve a credit report, financial statements, and details regarding employment and salary. In the case of a real estate transaction, underwriting may involve the property itself being brought into scrutiny. In general, the work profile of a bank underwriter involves following things:
• Ability and willingness of the client to repay the bank loan. this is done by assessing his income and expenses.
• Reviewing his current assets: this is done by looking into his bank accounts, securities, properties or any other form of asset to check his financial stability.
• Checking the client's collateral: the project of or the property is
appraised to ensure that it is worth that much amount.
Loan underwriting is a very complex job, and you will need to have excellent skills in math and statistics. The minimum qualification required is to do graduation with finance as majors. You need to have analytical skills to interpret the financial status of the clients. There are various dedicated courses for becoming an underwriter such as:
• Actuarial science which is a 3 year degree course which involves math and statistics as major subjects.
• LOMA courses and/or designations.
• 2 years management course in finance.
Improve your communication skills as you have to deal with various types of customers. Being a computer literate is a must. Team work skills are must as a great deal of tome is spent working along with analysts and other underwriters.
The global opportunities for a bank underwriter are huge since every financial institution requires loan underwriting. If you have good experience to back your educational skills as an underwriter, you really stand a good chance of working with international banks. Especially with the sub-prime crisis, the importance of underwriters has increased.
Employment outlook: Loan officers can expect average employment growth. Job opportunities will be excellent for people with a college education.
Salary depends on your work experience and expertise. In general, it is around $45,000 to $50,000 annually. But top level underwriters earn as high as $100,000 annually.
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