Underwriting

Underwriting

May 21, 2025


What is Underwriting?

Underwriting is the process lenders use to assess a borrower’s risk and determine whether to approve a mortgage application.

Why Underwriting Matters in Real Estate

In Canadian real estate, underwriting plays a critical role in securing mortgage financing. Lenders review credit history, income, assets, employment, and the property itself before making a loan decision.

Steps in underwriting may include:
  • Verifying income and employment
  • Reviewing credit score and history
  • Assessing debt service ratios
  • Appraising the property’s value and condition

Automated underwriting systems may issue quick decisions, while complex applications (e.g. self-employed borrowers) are reviewed manually.

Understanding underwriting helps buyers prepare accurate documents, reduce delays, and improve approval odds.

Example of Underwriting in Action

The lender’s underwriter reviews the buyer’s income, credit, and appraisal to approve the mortgage before closing day.

Key Takeaways

  • Evaluates borrower and property risk.
  • Required for mortgage approval.
  • May be automated or manual.
  • Relies on complete documentation.
  • Crucial step in the financing process.

Related Terms

  • Mortgage Qualification
  • Credit Score
  • Debt Service Ratios
  • Appraisal
  • Lender Guidelines

Related Terms

Key Money

Key disclosure refers to the seller’s obligation to disclose material facts or known defects about a property that could affect a buyer’s decision to. more

Kick-Out Clause

A kick-out clause is a provision in a conditional real estate offer that allows the seller to continue marketing the property and accept another. more

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