Steps of the Loan Process Explained for Millennials

As millennials are establishing their place in the economy, more are borrowing money to purchase cars, houses, etc. The process has proven to be complicated and mistakes can be expensive. It is important to prepare yourself and to be informed about the process before taking out a loan. Do your research:

Decide Where to Borrow

 Banks and credit unions are a good place to shop for the majority of loans. It is important to compare several institutions to find out which ones have better interest rates and costs.You should avoid high-cost loans and predatory lenders. It may be tempting to accept whatever you can get when you’ve been repeatedly turned down, but don’t do it! It’s not worth it because you’ll find yourself in a hole that will be difficult to get out of.

 Understand Your Credit

 You need credit to get a loan, which means you have a history of borrowing and repaying loans. It is important to develop a strong credit history, so lenders will lend you more and offer better rates. You can get one free report from any credit reporting agency a year to see if you look like an attractive buyer.

 Understand The Loan

 Before you get a loan, understand how the loan works. Ask the following questions: Will you repay the loan monthly or all at once? What are the interest costs? Will you repay electronically through your bank account? You must understand the process and how everything will work before you borrow the loan. It is also a good idea run loan calculations before getting a loan to see how much you’ll owe and how much you could save on a different loan amount or interest rate. Only get a loan that you can truly handle!

 After your research, you are ready to get your loan. There are FIVE steps in the loan process:

 1. Pre-Approval

In the first stage, the loan officer will ask the customer to provide all income and asset documentation to determine the loan qualification. These documents include: a credit report, W-2 forms, pay stubs, recent Federal Tax return, and 2 months of bank and investment statements. Your credit will be reviewed and the loan data will be put through underwriting. It can be weeks or even months to receive pre-approval.

 2. Application

At the second stage, the loan is official and the loan officer will update any documentation already submitted that are not older than 90 days. Customers will be asked to address credit issues on their credit report, and source documentation for deposits on bank statements that are more than $1000. Customers and loan officers must complete their loan applications, which can take up to a couple of hours with the current paper-based loan application process.

 3. Submitted to Processing

 At the third stage, the loan processor will review the application submitted by the loan officer. The processor will order the following: a title examination, an appraisal, and if needed an additional questionnaire. If the loan processor catches anything that the loan officer missed, then they ask for that documentation during this time.

 4. Submission to Underwriting

 When the appraisal report is returned, the processor is required to order a fraud guard report. This report examines the loan information and reviews everything and everyone in the process to ensure that there isn’t any fraudulent activity. The processor will then review the appraisal and all of the loan documentation before submitting to the underwriter.

 5. Underwriting

 The underwriter is responsible for reviewing the entire loan package and issuing the approval. All of the information must be in compliance with all regulations and guidelines. If concerns arise during this fifth stage, the underwriter can approve the loan but will make it subject to additional documentation.

 Don’t worry, Zikher can help!

 The loan process is complicated and can be very frustrating for customers, loan officers, and bankers. Zikher is designed to make this process easier by digitizing the entire loan application, including necessary document upload as well as E-signature. Bankers, loan officers, and decision makers can conveniently access information on one platform instead of the current 3-5 different loan origination systems. Customers can fill out their online application in a few minutes, which is much more efficient than the current paper-based process that takes hours. They have help at their fingertips with our customer relationship management tools that let them message or video chat a loan officer 24/7 if they need help through the loan process. Bank customers used to be in the dark without up-to-date loan status information, but Zikher solves this issue by giving customers loan information in real-time. The loan process is clearly complicated, but can be made easier and more efficient with Zikher.

Author: Whitney Besser

Works Cited:

 Pritchard, Justin. “The Beginner’s Guide to Getting a Loan.” The Balance. N.p., n.d. Web. 02 May 2017.

Tierce, Amy. “5 Steps in the Mortgage Process, or, “Stop Asking Me for More Paperwork!”.” Natick, MA Patch. Patch, 22 Mar. 2012. Web. 02 May 2017.

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