What Is a Loan Officer?

A loan officer is a representative of a bank, credit union, or other financial institution who finds and assists borrowers in acquiring loans. Loan officers can work with a wide variety of lending products for both consumers and businesses. They must have a comprehensive awareness of lending products as well as banking industry rules, regulations, and required documentation.

How a Loan Officer Works

Loan officers communicate with numerous individuals to facilitate the lending process for banking clients. Loan products that may involve a loan officer can include personal loans, mortgage loans and lines of credit.

Loan officers are a direct source of contact for borrowers seeking loans from financial institutions. Many borrowers prefer working with a loan officer directly to ensure that all of their needs are met. While traditional bank lending procedures can be more time intensive, the personal interaction often gives borrowers greater confidence in executing a lending deal.

Loan officers work with a wide variety of lending products and have a comprehensive awareness of them and banking industry protocols, giving borrowers greater confidence in executing a lending deal.

How Do Borrowers Use Loan Officers?

Loan officers work with a borrower to provide consultation, application, underwriting, approval, and deal-closing services. They have knowledge and access to all types of loans offered by the financial institution they represent and can provide consultation to borrowers on the best loan for their individual needs. When a borrower decides on a loan product, the loan officer helps guide him or her through the application. From there a loan officer also initiates the analysis of the institution’s underwriter, who analyzes and assesses the creditworthiness of potential borrowers for loan approvals.

If a borrower is approved for a loan, loan officers are responsible for researching and presenting the appropriate documentation and loan closing documents to ensure compliance. The documentation required for a loan is often automatically generated by a financial institution’s lending system, which has been programmed based on the rules and regulations governing each type of loan.

Secured loans will generally have a greater amount of documentation required than unsecured loans. Mortgage loans specifically must adhere to a range of regulated documentation that varies by the type of loan being closed. All types of loans need a closing statement, each with its own documentation requirement. Standard mortgage loans must include a closing disclosure that has to be provided to the borrower three days before the loan is closed. Reverse mortgages and mortgage refinancings require a HUD-1 settlement statement to close the loan, which must be provided one day prior to closing.

Some loan officers are compensated through commission for the role that they play in the lending process. This commission is a prepaid charge and is often negotiable. Commission fees are typically the highest in mortgage loans, providing compensation to loan officers for the broad range of services they provided throughout the lending process.