Question by yahoooo!: How does Loan officers price a loan?
What is a rate sheet? Do you need to fill up the application for loan to be able to be prequalified? If so, Is this the same loan application that’ s to be submitted to the lender for preapproval? Help? I’m so confuse.
Best answer:
Answer by mark a
Rate sheets are in sections and are divided up regarding how many times one has been late on their mortgage in the last 12 months.
They are also divided up in to bigger sections regarding impound accounts and if the borrower has 6 months worth of payments as an assett.
The actual rate sheet is a grid in 5% increments for loan to value and the credit score in 20 point tranches. From 500- to 740+. The number listed is the par rate. We next make our additions and subtractions.
For example, in California I would price out a loan with an underwriter with the following info.
Full doc, no lates, or bankruptcies Single Family Residence.
680 middle, 80% loan to value, loan amount 400K.
I would get an interest rate back from the underwriter.
I would then make my corrections to price the loan out.
I would deduct 1% for loan amount and .75 for being a high volume lender.
If one wanted an interest only of a 50 year term I would add accordingly. If they wanted a lower payment, I would deduct accordingly. This is all done through a computer program.
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All loans are based on risk factors.
And yes you must fill out and sign a credit application to be submitted and approved.
The risk factors involved will be the LTV or loan to value, the term of the loan and your credit score/profile. This is made up of your credit report and the information on the application such as how long you have been at your residence/at your job and how much money you make a month before taxes.
If it’s a vehicle loan, they will also want to know how old the vehicle is and how many miles are on it.
Based on all of the above information the loan officer will assign a interest rate.
I work at a credit union and we grade the member and then a gets a certain rate b get a rate and so on. But it is an overall view of you credit history and your relationship with the financial institution. Also different types of loans have different tiers, for example a unsecured personal loan will have a higher rate than something that is secured.