How to Underwrite Apartments
Underwriting apartments is the process of analyzing your loan application for the purpose of buying an apartment building for determining the quantum of risk involved in granting the loan. This is calculated based on your credit history, your earning capacity, your present financial stability, and the value of the asset you want to buy and the net annual income the property fetches for you.
The apartment underwriting process starts with the determination of the net operating income, based on the proforma submitted by you to your lender. This will contain all the details of the incomes and expenses that are currently available to arrive at the figure of the net operating income.
Based on this and other factors the lender will review the loan application to determine the amount of risk involved and take a final decision on your loan application to finance the purchase of the apartment building you want to buy.
The sole purpose of the apartment underwriting process is to mitigate the credit loss that may arise to the lender, and it goes through an elaborate process taking into many factors into consideration as the Underwriting process for a multi-family property is more complex than underwriting a single-family home.