What is mortgage origination?
Loan origination is the process by which a borrower applies for a new loan, and a lender processes that application. Origination generally includes all the steps from taking a loan application up to disbursal of funds. For mortgages, there is a specific mortgage origination process.
How mortgage origination works?
- The first step in mortgage origination is pre-qualification. During this stage, the borrower will receive a list of items they need to pull together to submit to the lender.
- Once this information is submitted to the lender, the mortgage lender moves to the next step, i.e., submission of application and supporting documents. Many times, a manual paper application is completed, but nowadays, an electronic file is completed and submitted by the borrower. New technologies like artificial intelligence allow completing the application digitally.
- The next step is application processing, that includes automated data capture, review and validation of application and documents. The step includes checking the documents for completeness correctness and consistency. Depending on the technology employed by the lender, a sophisticated AI powered loan origination system (LOS) can automatically flag the electronic files with missing fields and return it to the borrowers to rectify.
- Decisioning due diligence, when an application is deemed complete, the underwriting process begins. The company runs the application through a process of taking a variety of components into account: credit score, risk scores, and many lenders will generate their own additional unique scoring criteria that are unique to their business or industry.
- Next step is decision and offer processing, the file can be approved, denied, or sent back to the originator for additional information. The mortgage lender also run quality check to assure the quality of the loan’s genuineness. This is essentially a last look at the application before it goes to funding.
- Loan Funding – This is the final process in sanctioning a loan in the mortgage industry, by ensuring that all necessary documents are executed before or together with funding.
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