Loan origination
Loan origination refers to the initiation of the loan application process, which occurs when a borrower submits their financial information to a bank or mortgage lender for processing. Depending on documentation type, a borrower will have to supply certain credit, asset, employment, and housing information to a specified bank or lender to initiate the underwriting of the loan application.
Along with that, the borrower will have to sign forms that allow the broker (if applicable) and bank or lender to pull a credit report and release information about the borrower. Once the information is submitted to the appropriate bank or lender, an underwriter will decision the application, either approving, suspending, or declining the loan.
If the loan is approved, a set of conditions will be released that need to be met before the loan can move to the funding department. If suspended, certain paperwork or an explanation may be necessary to proceed any further. If the loan is declined, the borrower will need to send the loan elsewhere or possibly apply under a different program.
Loan originators are also known as loan officers, mortgage brokers, or simply salespeople. And fees associated with the origination of a loan are called loan origination fees, otherwise known as mortgage points. This “loan origination fee” is paid to the loan officer or broker who initiates and completes the loan transaction with the homeowner, and is paid out only if and when the loan funds.
Brokers and banks may or may not charge an origination fee depending on the terms of the deal. All fees should always be fully disclosed on the Good Faith Estimate and Hud-1. Pay close attention to this figure to see exactly what you’re being charged. Most upfront banks and brokers will charge 1% of the loan amount, although this can vary and you may be able to avoid this fee if you shop around.
