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Why Are More Lenders Taking to Pre-Underwriting?

The lending industry is evolving rapidly and as a consequence, it’s getting increasingly complex and competitive. Today, it’s not as easy for lenders to expand their business as it was a few years ago. This is forcing all stakeholders to constantly pursue innovative ways to carry out their business more efficiently and effectively. As such, […]

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The lending industry is evolving rapidly and as a consequence, it’s getting increasingly complex and competitive. Today, it’s not as easy for lenders to expand their business as it was a few years ago. This is forcing all stakeholders to constantly pursue innovative ways to carry out their business more efficiently and effectively. As such, saving on operating costs and time associated with all loan files has become a top priority for lenders. Today, most major lenders are taking to pre-underwriting as an added security layer in their mortgage underwriting process to identify unworthy applicants and avoid business losses. While doing that, they check every mortgage application thoroughly before passing them on for further processing.

The following are the most significant benefits owing to which more lenders taking to pre-underwriting.

Price validation

By carrying out pre-underwriting in the mortgage underwriting process, lenders can gauge the actual worth of properties through market capitalization. For this, relevant data is obtained from property appraisers and other sources to help lenders eliminate false listings. By doing this, lenders can better negotiate the listing price with homeowners. By reviewing the title report of properties, the lender gets an insight into the clear titles. This makes it easy for the lender to ensure that the property is free of all claims, liens, and disputes.

A clear view of the borrower’s credit history

The pre-underwriting process gives lenders a comprehensive outlook into the credit report of borrowers. They can also obtain revealing feedback regarding the applicable credit issues which enables them to identify and remove any borrowers with a high propensity to default.

Early detection of anomalies

Reviewing the loan file prior to sending it for further handling enables lenders to identify anomalies in the early stages of the process. Lenders can avoid future troubles by recognizing any potential frauds on the borrower’s behalf. By preventing such issues early on, lenders greatly enhance their chances of staying profitable.

Boost the bottom line

Pre-underwriting is an effective way to beef up profit margins for lenders. Through pre-underwriting, they can get a competitive edge in the market by improving the quality of loans disseminated. It saves on the time needed to process loans and, in the process, improve on bottom line

Save time and cost

Since the pre-underwriting process helps lenders identify qualified loan applications based on borrower and property qualifications, only applications that meet the pre-underwriting qualifications are forwarded to the loan fulfillment center. Consequently, the lender enjoys more loans that fund, improved loan production, and reduced production costs since internal loan processors and underwriters don’t have to spend time on unqualified applications.

Lenders opting for pre-underwriting in their mortgage underwriting process get the option to pre-underwrite all pre-authorized borrowers or choose specific loans, borrowers, or property types to put through the processes. Prewriting is a must-have tool for lenders who are operating in an aggressive seller’s market and dealing with multiple cash buyers.  Also, for lenders that have lost out on multiple properties and want something to make offers that stand out from the crowd, pre-underwriting is a highly effective choice.

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