Loan Processing means the steps taken by an institution lender from the time a request for a loan application is received to the time the loan is approved or denied, including taking the application, credit investigation, evaluation of the loan and other steps.
Below is a guide to the main steps a loan processor must complete to ensure a successful loan package. While there may be variations depending on your employer and state or local laws, this is still an adaptable guide in any lending environment.
Loan File
The loan file is where it all begins and is the one that contains the loan application. Also include any comments made during the loan process. You as a client must make sure you have understood all the steps and requirements of the loan before proceeding.
These are some of the requirements included in the loan application:
- The loan amount
- The purpose of the loan
- Credit score and history
- Income
- Debt-to-income ratio
- Any guaranties or collateral
Credit Report
A credit report is an accumulation of information about how you pay your bills and repay loans, how much credit you have available, what your monthly debts are, and other types of information that can help a potential lender decide whether you are a good credit risk or a bad credit risk.
In many cases, the loan officer has already provided a credit report to the loan processor before the loan application is submitted.
In order for the financial institution or your personal borrower to access this information, you must grant them permission to assess the value of your loan.
Title Records
The loan processor always requires a title verification for certain loans that you want to apply for, for example for homes, cars, boats, etc. These records help the lender verify if there is any lien on the object for which the borrower is requesting the loan.
Verify Income Sources
This is one of the most important points during the loan process because all of the borrower’s income, assets, and employment information is verified. But each company differs in how it verifies this information.
For example, in some cases verbal verification of employment is sufficient, but in other cases a written letter from your employer may be required. Also for some lenders, pay stubs and W2 forms are sufficient. Therefore, you must ensure that you follow the specific procedures of your lender.
Appraisals, Insurances and Inspections
Once all of the prospective borrower’s sources of income and employment have been verified or are well along in the process, you are ready to begin the next step which is appraisals, proof of insurance, and inspections.
These requirements will depend a lot on the state or local laws where the loan is being requested and processed, as well as the type of loan.
Loan File Review
A loan review provides an assessment of the overall quality of a loan portfolio. So a loan review deals with the following points:
- Evaluates individual loans, including repayment risks.
- Determines compliance with loan policies and procedures.
- Identifies documentation flaws.
- Provides priority credit risk management results.
- Recommends practices and procedures to address the findings.
This is the loan processors opportunity to catch any mistakes or oversights before officially filing the loan and handing it off to the underwriter.
Certification and File Delivery
Once all information in the loan file has been processed and your loan processor is satisfied with all documentation submitted and verified, the last step is to finalize the loan package and deliver it to the lender, underwriter and servicer.
Therefore, take these considerations into account and prepare the necessary documentation for when you go to present your loan application.
Remember that My FCI provides a range of loan and document preparation services to help you meet all of your goals.
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