Financing the purchase of a home is often a complex and confusing task. Fortunately, there are professionals whose sole job is to help you through the lending process, such as loan originators and loan processors. Working with mortgage experts can ensure you don’t make any mistakes while finding the most suitable mortgage for your needs and wallet. While loan originators help borrowers get mortgages, loan processors administrate paperwork for a loan. Here’s a breakdown of what each one does in the loan process.
For help with figuring out how to make sense of your own loans, consider working with a financial advisor.
What Is a Loan Originator?
A loan originator, also knowns as a mortgage loan originator (MLO), walks borrowers through the mortgage approval process. They help the borrower with everything, from preparing the mortgage applications to verifying the applicant has all current financial documents in place.
Loan originators can either be a company they originate loans or an individual who manages the loan on behalf of a single company. They could also be a mortgage broker that connects a borrower with several different lenders to find the best financing solution for your needs.
It’s a requirement that all non-bank mortgage loan originators have a license in all states where they originate loans. Lenders have a requirement to follow the SAFE Act of 2008 (Secure and Fair Enforcement for Mortgage Licensing). This means it is required for federal and state licensing for MLOs to be published in the NMLS (National Mortgage Licensing System and Registry).
What Does a Loan Originator Do?
It’s the loan originator’s responsibility to put borrowers at ease during the entire application process, from the initial application to the closing. Not only that, but they must educate the borrowers on the process and what it entails. Because they are an educator of sorts, mortgage loan originators are well-versed in lending products and have an extensive understanding of guidelines and documentation requirements for loan approval.
The loan originators will also gather and verify all documentation received. They do this to ensure the borrower is qualified for the loan. To assess the likelihood of approval, they look at several factors, including their credit worthiness, incomes and other assets. Additionally, they can aid borrowers in pinpointing the best type of loan for their financial situation.
What Is a Loan Processor?
A loan processor works with a loan originator to ensure a borrower’s financial profile and resources are a good fit for the mortgage product they select. The mortgage processor will do so by preparing the mortgage application file and other financial documents required for financing. They will deliver all of this information to the mortgage underwriter who decides if a borrower’s financials meet the approval criteria.
Essentially, the loan processors organize all documentations and application information according to the guidelines of the loan the borrower selects. Organizing the documents streamlines the underwriting process, so the underwriter can quickly access the appropriate information and make a speedy lending decision.
Keep in mind, the loan processor does not have a license and cannot provide guidance on suitable lending products or interest rates and terms.
What Does a Loan Processor Do?
Loan processor’s main responsibility is to collect and verify that all documentation and information is in order to complete the loan approval process. They make sure that all of the required documentation is gathered and includes the precise information the underwriter needs. The documentation they gather consists of W-2s, salary income, tax returns, bank statements, proof of insurance and proof of assets and debts.
Loan processors will also request your credit report. They will look for late payments, accounts in collections and any inaccuracies. They may then ask you for letters of explanation to understand your credit more. The chances of getting a loan approval increase with a good credit score. They also order title work to ensure the home is free and clear of any ownership and appraisals if it’s needed.
Lastly, they monitor mortgage application deadlines to ensure you close in. timely manner and avoid late fees.
Loan Originators vs. Loan Processor
Essentially, a loan originator shepherds your loan from the application to the closing table. They work directly with loan underwriters to complete your loan approval. Whereas the loan processors assist the loan originator with the paperwork involved in the lending process. They organize and handle all of the documents the underwriters require.
Once the loan originator helps the borrower determine the best type of mortgage for their situation and pinpoints loans terms, type and size, all of the documents and information will go to the loan processor to manage the paperwork for the underwriter. In other words, the mortgage processor acts as the middleman for the loan originator and the loan underwriter.
The Bottom Line
When financing a home, there are many professionals who can help you with all the tiny details and tasks. Loan originators and loan processors work with you to make sure the loan process is accurate. Your loan originator helps you through the loan application process, while the loan processor works through your application and documents to make sure nothing is missing. Both work hand-in-hand along with your lenders to ensure a successful lending process.
If you have additional questions about applying for a mortgage, consult with a financial advisor. A financial advisor can answer all of your questions and point you in the right direction.
Tips for Getting Mortgage Preapproval
- Mortgage preapproval requires extensive documentation and research. So always have a mortgage preapproval checklist by your side.
- Purchasing a home may be the biggest and most important investment you’ll ever make. But you can run into some pitfalls before you call your dream home truly yours. That’s why the guidance of a qualified financial advisor can be crucial for you and your family during this process. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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