Process Loans
As a loan processor, your role is to to put together a loan package that can be underwritten by the borrower’s bank. Processing a loan application can be very time consuming and requires a lot of paperwork and supporting documentation on the part of the borrower, but if you follow the process slowly and carefully, you should be able to successfully process a loan.
Contents
Steps
Reviewing the Application and Supporting Documentation
- Check if the borrower has received pre approval for the loan. By the time the borrower's application reaches you, they may have received pre approval for the loan via their bank, based on their finances. The lending agent at the bank will act as the intermediary between you and the borrower.
- Processing usually occurs 5-20 days after the borrower has completed the loan application.
- Verify the borrower’s employment. In addition to reviewing the borrower’s tax returns and current proof of employment, you should also contact your employer for official verification.
- Review the borrower’s credit report. Use a credit report from three credit monitoring bureaus to verify the borrower’s debt and payment histories, as well as borrower’s credit score.
- Check the borrower’s assets (checking and savings accounts) and any outstanding debits (car payments, student loans).
- If there are unacceptable late payments or judgments for collection, have to borrower provide satisfactory written explanation for them.
- Ask the borrower to submit any additional reports or documents, as needed. For example, if the borrower is purchasing a home, you will need their title report to ensure there are no outstanding liens against the title, which would affect their legal ownership.
- For a mortgage loan, you will need to pay particular attention to the borrower’s income to ensure their total monthly mortgage payments will not swallow up their total gross monthly income.
- You should also make sure the borrower has a home insurance policy.
Handing the Loan Package over to the Underwriting Team
- Understand the role of the underwriter. The underwriter is responsible for determining if the loan package is acceptable and that the borrower’s risk has been established.
- An underwriter may also look at the borrower’s ability to pay off the loan, their credit history, and any collateral offered against the loan.
- Lender underwriting occurs 20-30 days after it has been submitted by the loan processor.
- Communicate with the underwriting team if a “suspense” is placed on the loan. A “suspense” occurs if more information is needed for the loan package. Discuss any issues with the underwriter to try to resolve them.
- If necessary, the borrower may be contacted by the underwriter to supply additional documentation.
- Allow the underwriter to approve or deny the loan request. Once the loan package is in order, the underwriter will give conditional approval to the bank, who will then notify the borrower of their approval.
- As the loan processor, you are now no longer involved in the loan package.
Tips
- Try to get as much financial documentation as possible from the borrower before reviewing the loan package.
Warnings
- As well, if the borrower is self-employed or has a bad credit score, additional documentation will be required and could delay loan processing.
- Processing a loan can be very time consuming. Depending on the type and amount of supporting documentation required, the process may take up to 4 weeks. Make sure the borrower is aware of the time constraints.
Things You’ll Need
- Borrower's tax returns
- Borrower's pay stubs
- Borrower's bank statements
- Borrower's credit report
- Any additional documentation for extenuating financial circumstances (e.g., poor credit score) or that is part of the borrower’s full financial history
- A paper trail documenting the borrower's sources of income
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- Apply for a Federal PLUS Loan
