Mortgage loan processor: Your best friend when you apply for a home loan

In this article:

What does a mortgage loan processor do, and what does it mean when your loan is “transferred to processor?”

Once you and your loan officer choose a mortgage and start your application, a loan processor will probably take over. He or she may serve many functions, including:

• Entering your application information into the lender’s software system
• Ordering credit reports, appraisals, title work and other services
• Informing you of underwriting requirements and helping you meet them

Depending on the lender, a loan processor may be the invisible person who creates a loan file and keeps it on track behind-the-scenes, or your main contact during the entire mortgage application procedure.

What does a mortgage loan processor do?

You’ll probably meet your processor shortly after pre-qualifying for your home loan. That is, once your loan officer or mortgage broker has helped you choose a mortgage product, determine an interest rate and perhaps pulled your credit report.

Your next step is completing a home loan application. Some loan officers do that themselves, often using a laptop and some automated underwriting software (AUS). This process may include checking your credit.

Alternatively, your loan officer may bring in a mortgage processor to take your complete application, entering it into the lender’s system.

Related: How to close your mortgage faster

And your loan officer or processor will probably print out a mortgage application package and go through it with you, explaining what the disclosures mean, and making sure that you understand and are comfortable with what you’re signing.

Next, your processor will need to order verifications from your employer, bank and others to back up your documents and statements. Processors often open escrow, order mortgage insurance policies and flood certificates, set up appraisals, get title insurance, and create a file organized to lender’s very exacting specifications.

Automated Underwriting Systems (AUS)

Most mortgage programs can be underwritten electronically. They evaluate your debt, income and credit information and make one of four determinations:

• Approve, which means that as long as the paperwork you bring in backs up what you claim on your loan application, and the property meets the lender’s guidelines, you can probably close
• Refer, which means there are gray areas that must be examined by a human underwriter
• Refer with Caution, which is almost certainly an application decline unless the software is getting incorrect information, as it might in the case of identity theft
• Out of scope / ineligible, which simply means you don’t meet the program guidelines. For instance, your loan amount might be higher than the maximum allowed by the program

The software also generates a list of documents the lender must supply to back up the information provided on the application. It’s the processor’s job to get that documentation from you. He or she may have to adjust the application if the information doesn’t exactly match the documents.

Suppose that you state that you earn $4,657 a month. But the processor’s calculations from your pay stubs show $4,557 a month. So your processor must update the application and resubmit it, just to make sure that the change did not impact your approval or the lender requirements.

Dealing with underwriters

Your processor will likely take on many tasks you’ll never know about. An underwriter may ask for proof that your business is legit, for instance. The processor may simply get copies of your business license from the county without asking you to bring them yourself.

Related: What does "underwriting" mean? (dealing with loan conditions)

Note that no lender allows consumers to contact underwriters directly. They’d never be able to do their jobs, and they must also be impartial. Your processor or loan officer will always be your go-between.

If you have questions about the status of your mortgage application, your processor may have more details than your loan officer. He or she may be your main point of contact. That’s not putting you off with a “lesser” employee. It means you’re connecting with the person who has the information you need.

Working with your mortgage loan processor

The processor’s main function is to make things as easy for the underwriter as possible, increasing your chance of a good outcome.

This means he or she is working on your behalf. Don’t disrespect this valuable employee by ignoring requests for documents, explanations or other items. Return phone calls and spare these people any tirades about why you should not have to come up with your divorce decree / proof of residency / canceled checks / whatever.

Processors don’t make the lending decisions. But they can affect those decisions, and difficult clients yelling at them or calling a dozen times a day can cause them to miss an important detail. Or perhaps keep them from working extra-late to move your file through faster. Few processors work on commission, so extra effort on your behalf does not generally translate to additional pay for them.

Be cooperative, appreciative and nice. It might help you with your loan approval, and a little good karma never hurt anyone.