Research the job. Before deciding that being a loan officer is the right job for you, learn about the field using online resources, especially those that specialize in jobs like Bureau of Labor Statistics at http://www.bls.gov/ Loan officers assist people with loan applications for cars, home, and college tuition, helping to determine the best available loan and to make them aware of the various requirements. Although most work for banks or other credit and financial institutions, some work independently with clients and businesses.![When does a loan become a application letter When does a loan become a application letter](/uploads/1/2/4/9/124940669/811485061.png)
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Instructions for Completing the Uniform Residential Loan Application. Uniform Residential Loan Application – Instructions 4 Freddie Mac Form 65. Fannie Mae Form 1003 Form Revised 12/2017. Instructions Revised 02/2019 Select Does not apply. Assets – Bank Accounts, Retirement, and Other Accounts You Have. Lenders prefer to lend to borrowers with a long history of borrowing and repaying on time. If you add a borrower with strong credit to your loan application, you have a better chance of getting approved. More assets: Joint borrowers can also bring assets to the table. For example, they might provide additional cash.
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- Your duties as a loan officer will include processing applications, making sure that the information is complete and accurate. Analyzing the data, you will determine if a client is credit-worthy, whether to grant a loan, and, if so, under what conditions the loan will be made.[2]
- Some loan officers are highly specialized. They can deal in consumer loans to people, commercial loans to businesses, mortgage loans for real estate, or in loan collection. Some loan officers also travel extensively to meet with clients at businesses or homes.[3]
- The average salary for loan officers in 2012 was $59,280. Some are paid a regular salary while others are paid on commission, with the volume of clients depending on the overall strength of the economy. Many mortgage loan officers must also work long hours.[4]
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Mortgage lenders use the underwriting process to determine whether applicants are able and likely to repay a debt. Underwriters review the four C's of an applicant's file: credit, cash, collateral and the capacity to repay. An underwriter turns down a loan when the applicant fails to meet one or more of the lender's guidelines for any of these categories.
Tip
An underwriter can turn down a loan if the borrower doesn't have the financial resources to repay the loan or the appraised value of the home comes in too low.
At First Glance
A loan file typically makes it to an underwriter's desk after passing a preliminary review. The four C's – credit, cash, collateral and capacity to repay are critical components of this first stage. If a borrower has solid credit, the ability to place a substantial down payment, significant collateral and a demonstrated ability to repay the loan (i.e. a stable job), it is quite likely that their application will be approved.
Loan officers at banks and mortgage brokers who already know the lender's guidelines prescreen applications to determine whether they meet basic criteria. Although a loan application with complications that falls short of the lender's criteria may be sent to an underwriter for consideration, lenders usually only spend time and resources on files with compelling circumstances that warrant eventual approval.
An underwriter can still turn down a loan file after the initial review. The underwriter may uncover new information or misinformation that disqualifies the applicant almost immediately. For example, the underwriter verifies employment and income information with the applicant's boss and finds out that the applicant faces a pay cut, or may not have a job next year due to imminent layoffs.
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Loan Turn Offs
A lender can deem an applicant creditworthy at the time of application, yet turn down the loan just before closing due to a diminished credit score or increased debts. Rejection usually occurs when an applicant with borderline credit tips the scales during the interim by spending too much, missing a payment, or obtaining new credit, which also lowers scores. Because a lot can happen during the loan process, lenders usually pull credit again to ensure that the borrower still qualifies at closing.
The Matter of Collateral
Negative results on an appraisal can cause the underwriter to turn down a loan at any point after reviewing it. Appraisal reports, which lenders order from third-party appraisal companies to get an estimate of the home's value and condition, typically take several days to complete and return to the underwriter.
A value that's lower than anticipated can lead to insufficient equity and collateral for a loan. Borrowers may appeal the loan if they believe it is in error. Alternatively, the buyer can try to renegotiate with the seller at the lower price or make up the difference in cash to reach the higher purchase price.
Structural damage and extensive repairs also pose a problem for an FHA lender, as the property must meet minimum safety standards before FHA will insure the loan. The borrower can ask the seller to make repairs, foot the cost of the repairs themselves or back out of the deal. A second appraisal is needed – usually at borrower expense – before the loan will get approved.
Time Is of the Essence
Time is of the essence when buying or refinancing a home. Lenders try to push loans through the underwriting pipeline within 30 days to meet most real estate contract deadlines. Typically, the longer a loan takes to process and underwrite, the more impatient the applicant may grow, which can jeopardize the entire transaction and cause the lender to lose business. Lenders typically try to minimize potential snags in the underwriting process by requesting all of the applicant's relevant documentation up front with the loan application. A complete file at the onset gives the underwriter a clear picture to base a decision on.
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About the Author
K.C. Hernandez has covered real estate topics since 2009. She is a licensed real estate salesperson in San Diego since 2004. Her articles have appeared in community newspapers but her work is mostly online. Hernandez has a Bachelor of Arts in English from UCLA and works as the real estate expert for Demand Media Studios.
Cite this Article Choose Citation Style
C., Karina. 'When Does an Underwriter Turn Down a Loan?' Home Guides | SF Gate, http://homeguides.sfgate.com/underwriter-turn-down-loan-88134.html. 21 November 2018.
C., Karina. (2018, November 21). When Does an Underwriter Turn Down a Loan? Home Guides | SF Gate. Retrieved from http://homeguides.sfgate.com/underwriter-turn-down-loan-88134.html
C., Karina. 'When Does an Underwriter Turn Down a Loan?' last modified November 21, 2018. http://homeguides.sfgate.com/underwriter-turn-down-loan-88134.html
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