This Is How Loan Eligibility is Determined

A Combination of Actual People and Complex Applications Determine Your Loan Eligibility

Chances are if you’re like most Americans, you’ve either applied for a loan, credit card, or something that required a credit evaluation.  Part of the American Dream is owning a house, a car, and having financial security.  One way in which many Americans work to achieve these goals is through loans requiring credit checks.  Unfortunately, a loan or the preferred amount is never a straight-shot.  Thanks to multiple agencies work with banks and credit card companies, credit scores are widely available and affect all credit decisions.  However, your credit score isn’t the only determinant of loan eligibility and loan amount.  The loan and credit application process is much more complex.  Here are the steps in the loan application process.


Inquiring About a Loan or Credit

The first step, as obvious as it might seem, is to begin the application process.  To begin the process of determining eligibility, one must want to begin an application.  Most applications are done through computers and applications, even when an individual fills out paperwork.  The paperwork you’ve provided is always entered into a computer.  Essentially, all applications end up on a computer and in servers.  What happens next depends on the type of loan or credit application.

Basic Cash Loans

If all you’re hoping to do is get some fast cash, the next step may or may not include talking to a banker or loan officer.  If you’re looking for a low-interest cash loan with low risk, say through a well-respected financial institution, you’ll likely sit with a banker to discuss payment options and possible interest rates.  If you’re trying to get a pay-day loan or cash advance, the loan officer probably won’t sit down with you and discuss options.  You’ll probably just sign a bunch of documents that will keep you in debt with whatever payday loan company is offering the loan.  The next step will probably involve a loan origination system.

In many cases, a payday loan won’t involve a loan origination system.  However, all major financial institutions use loan origination systems that process applications.  Your application, other financial information and possibly input from the bank will be entered into the LOS application.  Within minutes, possibly seconds, you’ll receive a decision.  However, it’s up to the financial institution to accept the decision the loan origination system offered.

Credit Cards

Once you’ve completed a credit card application, the application is sent straight to the companies loan origination system.  Their LOS will then spit out a decision within seconds or minutes.  Using your application, income, assets, and credit score, a decision will be made.  That decision will not only include an approval or denial but also interest rates and credit limit.

Mortgages and Large Loans

Home and business loans are similar to cash loans, however, applicants can expect a much more detailed vetting process.  A banker or loan officer from the financial institution will sit down with you and anyone else attached to the loan to, essentially, interview you.  Once the bank considers the human side of things, the application will then go through a loan origination system.  The bank will then decide whether or not to honor the decision made by the LOS application based on other factors the LOS could not consider, like the interview.

If you’re approved, you’re then given an interest rate, repayment schedule, and the amount for which you were approved.  If you weren’t approved, a hard inquiry will go on your credit score which could negatively affect further credit decisions in the future.

How To Buy in a Seller’s Market

It’s a Seller’s Market, Don’t Try to Buy Alone

A report yesterday found that mortgage applications slid 2.8% even though interest rates remained low.  Nonetheless, it’s still a seller’s market and the slide in mortgage applications can even reflect that.  The prices of homes nationwide have risen over the past few years following the housing crisis.  More Americans have homes and given a general feeling of financial stability, many want to move into a nicer home or a more affluent neighborhood.  However, higher home ownership combined with low-interest rates makes for a fantastic market, for sellers that is.  Though it’s never advised that you buy in a seller’s market, there are ways to lower the price of your dream home.

The Report: 2.8% Slide in Mortgage Applications

  • Total mortgage application volume fell 2.8 percent on a seasonally adjusted basis last week compared to the previous week
  • Mortgage applications to refinance a home loan fell 4 percent for the week, 41 percent lower for the same week compared to a year ago
  • Median sale price for previously owned homes this past spring was up 6 percent compared to spring 2016, media prices are up to $244,800
  • Demand is outpacing supply throughout the United States

When demand outpaces supply, especially in the housing market, sellers know that they can raise the price and won’t have to negotiate on price as aggressively.  If a home is in a desirable neighborhood, sellers are in an even better position.

If You Want to Buy, Contact a Mortgage Broker

You could go it alone and work through your realtor and bank.  You wouldn’t be able to set yourself up for an ideal financial situation.  That’s because sellers know they can gouge buyers if they’re buying in the current market.  Mortgage brokers are a third party solution to alleviate the problem of buying in a seller’s market.

While you work with the seller, a mortgage broker will take on the tedious task of getting you, the buyer, the ideal mortgage rate.  Mortgage brokers can also reduce closing costs.  Mortgage brokers do the heavy lifting when it comes to getting a housing loan.  Regardless of the interest rates, mortgage brokers are able to get you the best financial outcome.  So while you work with the seller, mortgage brokers handle the stress of the financial aspect of buying a home.