Loan origination is a process that needs to be carefully understood by every borrower. Every lender gives a different interpretation of the loan origination. Therefore, it is important to take a holistic view of the whole process.
Loan funding is not a very complicated process as many people think. However, the borrower needs to submit essential information and documents.
Origination services and lien release services should be taken from any reliable company only. Plus, it is essential that you clearly understand the 7 stages of the loan origination process.
The first step is the pre-qualification where a list of items is given to the potential borrower. The borrower has to submit all the list items to the lenders. The items in the list include total household income, bank statements, payment history, tax returns, and current employment information.
- Loan Application
Next, the loan application is completed by the borrower. In past days, paper application was completed but now the electric version is mostly used. The borrower completes the application online through an app or website according to the specific loan products.
- Application Processing
The complete review of the application is then done by the credit department for accuracy and completion check. If any field is incorrect or incomplete then the application is returned to the borrower. A sophisticated Loan Origination System then automatically flag files if the application is submitted online. Exception processing is also part of the process in some organizations.
The underwriting process starts after the completion of the application. The application runs by the company by considering various components such as risk scores and credit scores. Every company adds some additional unique scoring criteria. The specific criteria are set by the companies according to the business and industry of the borrower.
- Credit Decision
After the completion of the underwriting process, the credit decision is then taken. The application can be approved and denied as well according to the submitted information. A denial may be revisited when some parameters are changed. A borrower can change the parameters like reduce the loan amount and different interest rates to lower payments.
- Quality Control
The quality control is the most important stage of the loan origination process. Quality control is important for lenders as consumer lending is a highly regulated process. The final decision and various other critical variables are analyzed according to both internal and external rules and regulations.
- Loan Funding
Loan funding is done when the loan documents are signed. Line of credit and second mortgage loans take extra time for legal and compliance reasons. Proper track of the funding is done to ensure that all documents are executed properly before funding.
On the Ending Note
I hope now you clearly understand the loan origination process. Therefore, look for a reliable company that provides proper origination services and lien release services. Make sure that you compare different companies and their requirements so that you can choose the right one according to your needs.