Modern lenders often use mortgage software powered by a loan pricing engine to determine loan prices. Loan pricing engines are used to input data, create a loan scenario, and calculate a loan price. For example, these forms typically include dropdown text boxes allowing you to select various parameters such as: loan type, prepayment term, occupancy type, property type, ZIP code, borrower type, and credit score.
After entering your parameters into the loan pricing engine, the mortgage software then computes the price of the loan. Depending on the mortgage software you have and how you set it up, you may be able to view multiple loan programs and their prices. This allows you to compare various loan scenarios. For example, if a borrower wants to see the differences between a 15-year fixed rate mortgage and a 30-year fixed rate mortgage, you could easily pull up the numbers using mortgage software.
Some loan pricing engines can be configured to display different information based on user permissions. For example, you may want to show or hide information such as rebates and commissions depending on who is working with the loan pricing engine.
With mortgage software, you can also estimate closing costs and prepaid items as well as determine the appropriate down payment amount. If a borrower wants to see how increasing the down payment would affect the monthly payment amount, you can easily change the parameters and calculate the new monthly payment.
Some mortgage software can also generate a loan scenario report to give to borrowers to address Dodd-Frank’s safe harbor provisions. Such a report details the pricing that was discussed for various loan scenarios along with how the decision was made for the selected loan.
Mortgage software powered by a loan pricing engine helps lenders quickly calculate the prices associated with various loans based on each borrower’s unique requirements and qualifications. Some loan pricing engines can also document pricing decisions, making mortgage software an asset to lenders.
About the Author:
Frank J Shields is the author of this article discussing what a loan pricing engine is. Frank has worked in the mortgage industry for over 15 years and now works as a consultant for various loan software companies in the industry.