From student loans to home mortgages, loans have become an everyday part of paying for the important things in life when you don’t have the immediate funds in your bank account. There are several steps and moving parts involved in obtaining a loan, from submitting your application and getting pre-approved to the actual closing, and you will likely work with several individuals and expert personnel throughout the process.
Loan processing generally describe closing the loan. It is essentially everything involved in getting the loan money in your hands and placing the total amount with interest in the lender’s books as an asset.
The loan processor is one of the most important people you will work with throughout this process and someone you will spend much of your time working with. Let’s take a closer look at loan processors and how they can help you obtain your loan.
The Role of the Loan Processor
Loan processors are not runners. They do not simply take your loan file and submit it to the underwriter. They play a crucial role in the loan approval process. Loan processors double-check all of the elements in your documentation – from employment to debt-to-income ratios.
For example, there may be a minor mistake made in the origination process. Those mistakes can potentially make it to the underwriter, and while it’s not impossible to make changes at that point, underwriters are not particularly forgiving. Any changes to your documentation require a great deal of time and bureaucratic red tape to fix.
Thankfully, the loan processor is there, acting as a safety net for you and the loan originator to constantly check that your information is correct, accurate, and clear.
Lenders do not want your loan payments to use up a majority of your monthly total gross income. While they do want you to be able to make payments, lenders also want to make sure that you can comfortably manage your current financial obligations, your basic daily needs, and any new monthly loan payments.
Your loan processor’s duties also change if you are looking to obtain a mortgage. Loan processors will make sure that you have a solid homeowner’s insurance policy in place after signing and before closing. Homeowners insurance protects you and your lender from suffering any financial problems in the event of a flood, fire, or other physical damages to your home. Your loan processor is also in charge of ordering a home appraisal, which is a professional inspection of your home to determine its current market value.
This shows if your lender will give you more money than your home’s actual worth and ultimately determines how much money the bank is willing to lend. Furthermore, for those who are refinancing a mortgage, loan processors request payoff information, namely how much you currently owe on your home, from your present lender.
Loan processors also order credit reports. These reports show your history with how you have managed and repaid any past bills, including home equity, car loans, and student loans. This gets factored into your income information, but more importantly, the credit report allows the lender to predict your ability to make monthly payments in full and on time.
What Is Loan Processing & What Goes Into It?
Loan processing procedures and the amount of time that loan processing takes can vary from lender to lender and based on certain state and local laws, but the general process remains the same.
This is where it starts with the loan processor. The loan file mainly contains the loan application along with any notes and comments about the potential borrower during the interview. The loan application contains all the financial and personal information about the borrowing that is pertinent to the loan processor, including the loan amount, the purpose of the loan, repayment period and plans, and any collateral or guaranties the borrower may offer.
Business loans require a more intensive application that includes a thorough business plan with projected income statements. The loan file should give the loan processor all the necessary information for them to understand the loan and why you need it.
In some companies, the loan officer runs the credit report before the loan application process even begins. If not, the loan processor will need to pull a credit report. The lender is not allowed to run a credit report on their own and must get written consent from the potential borrower to check their credit. As noted above, the credit report gives lenders an idea of your spending history to ensure that you can properly pay for your loan in a reasonable period of time.
Title Records and Information
This only really applies to loan requests for cars, houses, boats, and other large assets, but the loan processor may require a verification of title. A title verification helps the lender determine if the asset that the borrower needs money for has an existing lien.
Verifying Income Sources
This is potentially one of the most important steps in the loan processing procedures. The loan processor has to verify your income, employment information, and assets. Methods of verifying your income can differ from lender to lender. Some lenders may require an employment verification in writing in the form of a letter from your employer.
Other lenders may need pay stubs or W-2 (and other) tax forms. Still others may accept verbal verification of employment over the phone. Whichever method a lender uses, verifying income sources ensures that potential borrowers have the means to actually pay back a loan.
Insurance, Appraisals, & Inspection
Once your loan processor has verified your income and sources of employment, they will proceed with any necessary appraisals, proof of insurance, and inspections. This varies based on the item and the local and state laws. For instance, mortgages require a professional property appraisal to assess the home’s value, a full inspection, homeowner’s insurance policy, and proof that the home does not have any termites.
Loan File Review
At this point, most of the loan processing is complete, including receiving the credit report, verifying the income and employment, and performing any necessary inspections. During this step in the procedure, the loan processor reviews every single piece of documentation to make sure all the information is correct and clear. Any errors are changed and anything that seems vague is clarified or includes notes to explain why there isn’t greater detail.
The loan processor will also identify any potential red flags that the underwriter may catch. This is a huge step as it increases the chances of approval and prevents minor errors from bringing the approval process to a standstill later on. You have already spent so much time on the documentation. The loan processor will make sure that a simple error doesn’t lead to any costly mistakes.
Certification and Delivery
Once the loan file has been double-checked and reviewed, the loan processor will finalize the complete loan package and deliver copies to the underwriter, lender, and loan manager.
As you can see, the loan processor is involved in the entire procedure. At Del Toro Loan Servicing, we offer a wide range of services for lenders, brokers, and borrowers. Our team of experienced loan processors to guide you and make sure that your file offers proper, accurate documentation for seamless approval. To learn more about loan processors or begin loan processing today, please contact us online or give us a call today at (877) 335-8676.