What does "underwriting" refer to in the mortgage lending process?

In the mortgage lending process, underwriting refers to the comprehensive evaluation of the risk associated with lending money to a borrower. This evaluation involves assessing the borrower's creditworthiness, income, employment history, and overall financial situation, as well as examining the property being financed. Underwriters analyze these factors to determine if the borrower meets the lender's criteria for receiving a loan and how much risk the lender would assume by providing financing.

This process is crucial in ensuring that loans are only extended to borrowers who are likely to repay them, thereby protecting the lender's investment. The underwriter's decision ultimately influences whether the loan application is approved or denied, which makes this step vital to the success of both the lender and the borrower.