Underwriting procedure is used to mitigate or curb the impact of financial risks involved in loan borrowing and lending activities. Financial risk is usually a part of lending, insurance, and investment practices conducted by traditional banks, credit unions, and private money lenders.
This is where professional underwriters such as at the Commercial Private Equity in the US come in the picture. They ensure that the underwriting procedure:
- Assess and monitor the risk associated with a lending a loan to a borrower
- Set the correct premiums to meet the real cost of covering lenders
- Value investment risk to create an arcade for securities
- Guarantee appropriate assessment and risk exposure
- Help investors make the right investment decisions
Let’s talk about the different types of underwriting contracts and their uses.
Types of Underwriting Contracts
Underwriting process helps investors and lenders vet risks and protect their financial portfolios. In the financial services industry, there are three main types of underwriting contracts:
1. Loan Underwriting
All kinds of loans including hard money loans, bridge loans, and raw land financing entail some kind of underwriting prerequisite criteria. This process involves examination of an applicant’s records, income and debt, collateral value, size and appraisal of the property, and credit history.
A loan underwriting procedure can be completed in a week or even within a few days. Our nationwide experienced underwriters offer swift and professional underwriting services. Another common type of loan covered in loan underwriting is mortgage. The turn-in time for loan underwritten contracts depend on a borrower’s circumstances and income to debt ratio.
2. Insurance Underwriting
The next, most common type of underwriting contract is an insurance underwriting. This is conducted by policyholders for individuals or business entities looking for health, property, or life insurance.
The insurance underwriting process involves examining the risks associated to insure a person by evaluating their income, age, lifestyle, medical conditions, hobbies, and occupational history. Besides health insurance, the underwriting process also applies to coverage of auto accidents, environmental effects, and property damages.
3. Securities Underwriting
Securities underwriting is conducted to monitor and calculate risks related to IPOs and other types of financial securities. This type of underwriting is usually done by an investor or an investment institute to assess whether a particular security is safe for buying and selling or not.
Using the securities underwriting process, IPO companies raise capital amount necessary to ensure minimum limit of profit on their services. Sometimes, your securities underwriter might also make an exception by doing the initial security sale by themselves.
Whether you’re looking for an experienced underwriter or a reliable nationwide hard money lending company, Commercial Private Equity is here to help.
With our extensive 75 year long experience in the industry, we’ve served countless businesses and individuals close profitable deals by offering them quick and flexible hard money loans. Our project portfolio ranges from motion pictures projects to working gold mines in Utah.
Call us at 4049653625 for more details or apply for a commercial hard money loan across the US today!