Let’s Build Together an Underwriting Software to Automate Your Tasks
Automate time-consuming calculations to reduce human error and do things faster.
Underwriting is the very stage in lending when a single miscalculation or data entry error can cause irreversible financial losses for a lender.
That is why automating this number-heavy process with commercial real estate underwriting software is vital to ensure low financial risk, reduce the chance of human error, automate calculations to close deals faster, and increase the range of investment opportunities.
Underwriting in real estate transactions is the process of examining the finances of a loan applicant and their creditworthiness in order to check how much risk a lender will take if they issue that loan.
An underwriter is a financial risk expert, often working for a bank or any other financial organization, who reviews property appraisals and assumes the lender’s risk by analyzing the loan application and evaluating the borrower’s credit history and assets.
The common types of loans an underwriter assesses in commercial real estate are as follows:
Commercial real estate underwriting software or automated underwriting systems are digital solutions used by lenders, appraisers, and underwriters for the automation of processes like financial analysis and risk assessment.
They often incorporate machine learning mechanisms and artificial intelligence, as well as business rules manually defined by the underwriter, used to automatically collect and analyze borrower’s financials (credit history, income, due diligence documents, etc.) in addition to property-related data.
With real estate underwriting software, underwriting teams can ensure the whole process complies with external regulations. They can create workflows for the team and evaluate the viability of the deal with higher precision.
This is a feature that allows underwriting software tools to connect to systems like Equifax, Experian, and TransUnion in order to access borrower’s credit and payment history, helping underwriters conclude whether the borrower is qualified for the loan.
It also helps underwriters access income and asset details like tax returns, payroll records, and investments to conclude whether the borrower is in a position to support the loan or provide collateral.
By accessing liabilities like credit card balances and debt history, underwriters can calculate the debt-to-income ratio and draw conclusions on the borrower’s ability to manage debt.
A customer-portal is a web-based interface that provides borrowers and lenders with a centralized place for data storage and management.
This feature grants secure login sessions, allowing borrowers to upload loan-related data and documentation, receive notifications, and check the loan status without the need for one-to-one meetings with lenders in real life.
This feature helps underwriters ensure the CRE loan application process complies with industry regulations like Know Your Customer (KYC), Anti-Money Laundering (AML), and Fair Credit Reporting Act (FCA). With the compliance management feature, companies can assess their compliance risks and establish a proper level of due diligence.
With this feature, a system will flag any fraudulent activity. First and foremost, the system helps the user detect the borrower’s identity by checking their social security number and driver’s license or verifying their address for identity theft prevention.
Meanwhile, with credit report analysis and automated risk scoring, underwriters can check the borrower’s credit history and detect activities like unauthorized inquiries.
This is an underwriting software feature that allows users to ‘customize’ the initial decision rules and set new criteria for the loan evaluation.
A user can set a credit score threshold, debt-to-income, and loan-to-value ratio limit for the automatic approval or decline of loans. In other words, predetermined criteria enable users to manage loans that are automatically approved or declined by a system, a feature that reduces human error and saves time.
Real estate reporting features help underwriters gain insights into their loan portfolio, analyze its performance, assess the lender’s risks, and ensure that the loans comply with industry standards and regulations. Some underwriting solutions incorporate a forecasting feature as a part of analytics. Due to this feature, underwriters can forecast future loan performance based on historical data, contributing to the risk management of the entire loan portfolio.
The ability of the underwriting software to integrate with other systems is a must, since connectivity is a feature helping an underwriting system extract data from credit bureaus and verify borrower’s assets and income in systems like Plaid and FormFree respectively.
If an underwriting system integrates with other tools like loan origination, compliance, appraisal, and document management software, an underwriter can effortlessly streamline the loan origination process and document signing, check the correlation between the asset value and the loan to be borrowed while also ensuring the loan follows lending compliance regulations.
Most underwriting tools can integrate with credit reporting systems like Equifax, Experian, and TransUnion, automatically gathering financial data about borrowers-to-be (for instance, credit history), hence saving days on the research otherwise done manually.
The software also helps underwriters tackle mundane tasks like extracting due diligence data from property databases and financial statements with its further analysis and review.
Underwriting tools also minimize the amount of time needed to generate documents (creating a document takes a few minutes), perform calculations, and assess lender’s risks.
Underwriting automation software sends real-time alerts and notifications on changes or mismatches that occur in property information databases, credit reports, and financial statements. Let’s say the borrower’s credit score drops. In this case, a system will send an alert to the underwriter, notifying them that a credit history review must be performed.
With built-in calculation mechanisms, underwriting software automates complex calculations like debt-to-income ratios, cash flow coverage ratios, and internal rate of return among many others, helping underwriters qualify borrowers.
From now on, users can forget about multiple Excel sheets and documents scattered in different systems. All because most digital underwriting tools serve as underwriting platforms, meaning that all data is stored and managed in the same place without confusing duplicates and with simplified access.
It also streamlines tasks often performed manually like data collection, its entry, and processing, therefore automating workflows and reducing time.
Multifamily underwriting software helps underwriting professionals find more accurate expense and rent comparables, get real-time insights on market trends, and analyze the extracted data to identify patterns in real estate.
Having access to a wide range of accurate data like real-time market changes helps underwriters make a precise financial analysis and forecast on what returns investing in a particular property would be most profitable.
Automate time-consuming calculations to reduce human error and do things faster.
Clik.ai is a multifamily underwriting software that helps underwriters effectively process deals and close them faster.
Clik.ai creates investment models by extracting data from documents like rent rolls, operating and trailing twelve months (T12) statements, and can even map the extracted data right into the company’s models.
Also, the user can create interactive graphics to track property portfolio performance and generate reports for the evaluation of acquisition and asset management.
rDCF is a cloud-based CRE underwriting software that helps a user build a flexible discounted cash flow (DFC) model for complex property appraisal and automate their CRE loan underwriting calculations.
With rDCF, a user gets such features as Excel-based reporting, debt and equity modeling, and built-in underwriting metrics.
The software reduces data input errors, offers quick and easy file sharing, and allows users to create ready-to-present reports that are generated in a matter of seconds.
RealINSIGHT is a cloud-based CRE underwriting software that helps companies make informed investment decisions with centralized data and interactive tools.
It integrates with other systems, allowing a user to store data in one place that acts as a single source of truth (SSOT) anyone in the company can access.
The software automates workflows, offers reporting features, and builds up a database that a user can leverage in the future.
Enodo is a multifamily underwriting platform powered by artificial intelligence (AI) that enables underwriters to bring their real estate survey to a new level, find more investment opportunities for lenders, and track their underwriting process.
Enodo speeds up the deal flow by helping underwriters perform calculations with impeccable precision, choosing accurate property comparables, and evaluating deals in minutes with built-in AI.
Archer is a predictive acquisitions solution that assists companies in underwriting and deal sourcing.
The software helps a user compare the real estate submarkets and choose the one that aligns the best with their investment strategy.
With baked-in Auto Comps, Accelerated Underwriting, and Benchmarking, a user can build a deal pipeline and underwrite it in a matter of minutes.
Apart from poor customer service, it sometimes happens that a company whose services you’ve subscribed to stops updating the software. In the end, you get a tool that jeopardizes your data security and doesn’t meet industry standards. Meanwhile, with a bespoke software, your company´s IT team is fully in charge of changes.
Sure, developing a custom CRE system is a costly decision in the short term, that’s why switching to a pre-built solution might help you cut back on expenses. But in the long run, you’ll have to pay for annual subscriptions, and checks will pile up. Meanwhile, you pay for a custom-made solution once and for all and forget about writing checks.
Unfortunately, off-the-shelf tools are infamous for restricted functionality and low customization capabilities. Plus, you’ll never own pre-built software.
With a custom underwriting solution, there is always room for customization if your business expands. Also, you don’t want to overpay for the features underwriters aren’t using – a custom CRE underwriting system will include only the functionality that is part and parcel of your daily underwriting activities.
If you’ve already got loan origination, compliance, appraisal, and document management tools, you might want to synchronize them. An off-the-shelf solution won’t fully integrate with all your company’s tools, while a custom CRE will be designed in a way to accommodate a large-scale integration with legacy systems.
Digitalized workflows are a basis for closing more deals, having fewer errors, and saving time on manual data entry.
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Let’s optimize your commercial real estate underwriting operations with a digital solution to fine-tune your workflow and save you time!
Real estate underwriting software is a type of digital solution used by underwriters for the automation of activities like financial data collection, its analysis, and calculations.
The most popular underwriting automation software on the proptech market is Clik.ai, followed by rDCF, RealInsight, Archer, and Enodo.
Tania is a fan of technologies and an expert in writing about them. In her content, she shares insights into new trends and proptech solutions in real estate that can help your business thrive while keeping your customers content (pun intended).
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