With the advancements in technology, lenders are now able to connect with borrowers from across the country, and even pick their preferred ways of managing the application process. Whether you are looking for a new home or just want to refinance, you always have to go through the process of applying for your loan.
If you ever wondered what goes on during the loan process, and what steps you can take to better improve your chances of getting the amount of money and terms you want, here is a comprehensive guide which includes important ways you can help.
Loan Processing
The period between the loan application and the closing of loans is called the loan processing. During this time, the lender’s processing staff will assess your loan request against your portfolio to ensure that it is all complete and authentic. They will be verifying and compiling all the data you have submitted, and assessing your credit reports. Finally, this information will be utilized by the loan processor to decide on the status of your loan approval.
The loan processor is a professional financial expert from your lender’s company. A loan processor is the one responsible for the preparation and collection of all the required information and documents needed in order to grant a loan to the borrower. They will also assess your application and authenticate all the data written on it. If any part of your application is vague, or requires additional clarification, they will clarify what further information is necessary in order to process your loan application.
Collection of Information and Requirements
A company’s loan processor’s main job is to authenticate all data provided on your loan application. This means the loan processor will verify your income details, assets and liabilities, and they will be especially strict on your income verification, and verifying your DTI, or debt-to-income ratio. Why? Because the lenders don’t want your existing bills and expenses to take up the majority of your available income. Take note that lending companies always want to be assured that you can manage all your responsibilities, as well as your new monthly loan payments.
In order to initiate the verification to progress, you will need to submit the following:
- Proof of Income – Your W2, pay slips and a phone call to your current employer/company will all be required from you. If you have income from property rentals, child support or 1099 work, you will be required to provide proof or your job as well.
- Tax Returns – Check that you have a copy of your tax returns from the past three to four years. They need his to verify your source of income especially if you are self-employed.
- Statement of Assets and Liabilities – Check that you have on hand your most recent bank statements, your savings accounts statements, and information for any other loans, if there are any.
- Proof of Insurance – Request documentation that shows your coverage from your insurance company. The document must also show proof that your insurance policies are updated and current.
Appraisal Orders and Credit Reports Verifications
If your lender has checked for your financial stability, it is time to assess the loan you want to receive. This is where appraisals come in. An appraisal is one of the most critical factors of processing a loan, as it will decide if your lender will allow you to borrow money. The appraisal will be the absolute deciding factor on how much the lending company is willing to lend.
Loan processors will also verify your credit reports. Your credit report will show the loan processor how you have managed paying previous bills, such as and car loans and HELOCs. Looking at your credit history report will give the lender the ability to forecast how likely you are to pay your debts on time in the future.If you’re refinancing, the loan processor will ask for your payoff information from your current lender. Knowing this data will help the lending company decide what your new monthly fees will be.
The Loan Underwriter
As soon as the loan processor finishes collecting all the required documents for your application, your portfolio will now be forwarded to the loan underwriter. A loan underwriter will double-check your financial documents one final time time to guarantee that all necessary requirements are up-to-date and authorized. Underwriters will also try to find anomalies, and ask you to clarify any errors and inconsistencies in your portfolio. So, watch out for letters asking for explanations of a document such as why your income was decreased, why you changed your job or why your credit score went down.
After this is complete, the loan underwriter will determine if your loan application will be approved or denied. They do this by verifying that your financial stability meets all the rules of the loan you are currently applying for. If your loan is approved, you will proceed to the final step and start arranging schedules so that you can sign the paperwork and close the deal.
It is crucial to understand that there are small changes that may occur in this process; each lender will have their own requirements and policies that they use, so use this article as a guide to prepare, but ask your lender specifically what their process is and what they’ll need from you.
Tips For A Hassle-Free Loan Processing
Waiting for your loan process to be finished can feel like a lifetime. Luckily, there are a few things you can help to hasten the process:
- Make sure to provide the lending company all required documents as soon as possible, and quickly reply to them if there have any questions or verifications on your accounts.
- Always be in touch with the lending company. The most important factor to make any loan application process faster is communication.
- Notify the lending company if there are any related changes in your financial situation such as changes in income, job, liabilities and other factors that may affect your loan.