Regardless of the type of loan, you're looking to obtain, be it a mortgage or business loan, for example, odds are you're going to be working with a loan agent at some point during the process. Loan officers essentially guide you step by step through the requirements for any type of loan. They will help you identify what kind of loan is best suited to you and help you get together all the necessary documentation. Loan agents in many ways are indispensable to small business owners who need to get funding for their company. In this article, we look closer at the role of loan agents when it comes to facilitating the overall loan process.
The Role of a Loan Agent
Most often, a loan officer or agent will work for a bank or some other kind of lender. The type of loan agent with which people are most familiar is mortgage loan officers. However, keep in mind, there are loan agents that serve in multiple banking capacities, from business and personal loans to auto loans as well.
Primarily, you will be put in touch with a loan agent as you start the loan application process. They are the ones who will deem whether or not your application is eligible for processing. The loan officer with whom you work will look at all aspects of your application, from credit score to the amount of revenue/income you have. They will then either recommend that the lender approve you or on the flip side, inform you that your application has been denied.
The great thing about working with a loan agent is that their industry knowledge is generally quite extensive. It's their job after all, depending on what types of loans they specialize in servicing, to understand all components involved in the process and subsequently guide their clients accordingly. They also take the time to familiarize themselves with the various business and personal loan products available so that they can point clients in the right direction as far as what loan programs might best suit their immediate needs.
Do You Have to Pay a Loan Agent?
The borrower does not directly pay a loan officer. Rather, most such agents are paid via commission on the loan they facilitated. Mortgages tend to pay the largest commissions to the loan agents. But depending on the size of a business loan, those commissions can also be relatively substantial.
While being a loan officer does not require a professional degree per se, it does require that the agent is licensed following localstate/federal regulations.
A Loan Agent's Duties
There are a variety of roles and tasks that a loan officer will take on within the context of their job. Interacting with loan applicants consistently is a huge part of a loan officer's job. They are thereafter all to guide their customers through the process and make things as easy as possible. To this end, a loan agent must stay up to date not only on the available loan products but also on any regulations and criteria that apply to said products. As noted, a loan officer is licensed following state and federal regulations and so understanding what is required of them to this end is also critical.
When Applying for a Loan…
Your primary point of contact will be the loan agent you've been assigned to. As mentioned, it is their job to review all required documents needed for your business loan, mortgage, or personal loan as the case may be. They will also handle reaching out to the parties involved with your loan—from the underwriters to the attorneys if applicable. This again is so that the loan application process is as simplified for the client; borrowers, in other words, are not having to stress about getting in touch with all of the necessary people.
When you do meet with your loan officer, remember you want to put your best foot forward, financially speaking. This is the person who will decide whether or not you are worth the risk initially. The loan agent will carefully review your credit report for example and may have some questions regarding any red flags that might pop up, such as any missed payments, any notable drops in your overall score as well as periods during which your income fell sharply. You might therefore have to provide verbal and/or written explanations regarding anything that the loan officer finds on your credit report. Don't be afraid, however, to ask your questions throughout the process as well.
During this screening phase of the loan application process, the loan agent will also look closely at the debt to income ratio along with the total amount of debt that you may be carrying. This will enable them to determine whether or not you can comfortably afford a loan payment. The good thing here about working with an actual loan officer is that you do have a chance to explain some of those things that could seem questionable regarding your application. So be prepared ahead of time.
The entire loan application process from start to finish can seem tedious at times, which is why the loan agent is doing everything that they can to help make things more streamlined and ultimately easier. They will walk you through all stages of the process—pre-approval (if applicable/), the application itself, gathering the necessary documents, underwriting, and processing. Many loan officers will go so far as to prepare the application for their clients. They want to ensure that it is perfect before going to the underwriter and therefore give you the best chance at a seamless and successful loan experience. Once underwriting does approve the loan, the loan agent will prepare any requisite closing documents for you to sign.
As you can see, a loan agent is a key piece to the puzzle which is why it is so important for clients to be comfortable with their loan officer and always be open and honest with the agent throughout the entire process.