What is underwriting in the context of mortgage lending?

Underwriting in the context of mortgage lending is primarily about the detailed analysis of a loan application. This process involves assessing various aspects of the application, including the borrower's creditworthiness, income level, employment stability, and overall financial situation. Underwriters evaluate these factors to determine whether the borrower meets the lender's criteria for issuing a loan and if the loan is a reasonable risk for the lender.

While evaluating the borrower's credit history is an important component of underwriting, the process encompasses a broader range of analyses beyond just the credit report. It requires a comprehensive look at all elements of the submitted application and financial documents.

The process of servicing a mortgage refers to the management of the loan after it has been originated, including collecting payments and maintaining records. Selling a loan to secondary lenders, often referred to as loan selling or loan trading, is a later stage that occurs after the underwriting and origination processes have concluded. Thus, the correct choice captures the essence of underwriting as it pertains to thoroughly assessing a loan application before approval.