Underwriting is the process by which an underwriter analyzes a borrower’s financial credentials and the value of an investment to determine how much risk a lender will undertake if they sanction the borrower a loan.
Real estate underwriter who is a financial expert performs due diligence on income, assets, debt and property details to scrutinize a financing request made by a real estate investor or sponsor.
After analyzing the investment, the underwriter asks for a larger down payment or charges higher interest rates for high risk investments.
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Investing in venture capital funds is inherently risky and illiquid. It involves a high degree of risk and is suitable only for sophisticated and qualified investors.