What to expect when you hear the term loan servicing

So, you’re diving into the world of homebuying, and you keep hearing the term “loan servicing.” What’s the deal with that?

What is loan servicing anyway?

Loan servicing is all about managing your mortgage after you’ve signed on the dotted line. Think of it as the behind-the-scenes crew making sure your loan runs smoothly. Here’s what’s included:

Loan servicing functions	Description
Payment processing	Collecting monthly mortgage payments and applying them to your balance.
Customer support	Assisting with inquiries about the mortgage, payment history, or billing issues.
Account management	Tracking the loan’s remaining balance, payment history, and any changes to terms.
Escrow management	Managing escrow accounts for property taxes and insurance payments.
Default management	Reaching out to discuss options if payments are missed and initiating foreclosure if necessary.
Reporting	Providing regular statements and reporting payment status to credit bureaus.

When does loan servicing kick in?

Loan servicing starts right after you close on your home. Here’s a quick rundown of the homebuying timeline to show you when it all begins:

1. Pre approval: You get pre approved for a mortgage based on your financial info.
2. House hunting: You find your dream home (or at least a good enough one) and make an offer.
3. Loan application: You apply for a mortgage with a lender.
4. Loan underwriting: The lender checks your application, credit, and the property’s value.
5. Closing: You sign all the paperwork, and the funds are disbursed to buy the home.
6. Loan servicing begins: Congratulations, you’re a homeowner! Now, the loan servicer takes over. They handle your monthly payments, provide customer support, and manage everything related to your mortgage.
7. Loan repayment: You make your monthly payments, and the servicer keeps track of everything.
8. Loan payoff or transfer: Once your mortgage is paid off, or if you refinance, servicing may conclude or switch to another company.

Why should you care?

Understanding loan servicing helps you know what to expect as a homeowner. It’s not just about the mortgage; it’s about having someone in your corner managing the details. So, when you hear the term “loan servicing,” you can now visualize all the moving parts working together to keep your mortgage on track.

Does the homebuyer or the lender manage loan servicing?

Loan servicing is typically managed by the lender or a third-party servicing company. Here’s how it works:

• Lender responsibility: When you take out a mortgage, the lender is responsible for handling the servicing of the loan. This includes managing payments, keeping track of balances, and handling customer service inquiries.
• Third-party servicing: Many lenders outsource loan servicing to specialized companies that focus on managing mortgages. These companies handle the day-to-day tasks associated with loan servicing, allowing lenders to focus on other aspects of their business.
• Homebuyer role: As the homebuyer (or borrower), your role is to make your mortgage payments on time and communicate with the servicer if you have questions or issues regarding your loan.

Should I be concerned if a third party is servicing my loan?

You very likely don’t need to be overly concerned if a third party is servicing your loan. Here are some points to consider:

• Industry norm: It’s quite common for lenders to outsource loan servicing to specialized companies. These servicers are experienced and equipped to handle the complexities of mortgage management.
• Regulation: Third-party servicers are subject to regulatory oversight and must comply with consumer protection laws. They’re required to follow strict guidelines to ensure fair treatment of borrowers.
• Customer support: Many third-party servicers have dedicated customer service teams that can assist you with inquiries about your loan, payment options, and any concerns you may have.
• Smooth transition: If your loan is sold to a new servicer, you’ll typically receive a notification with information about the change. This process is designed to be transparent and is regulated to protect you.
• Focus on communication: As long as you maintain open communication with your loan servicer and understand your loan terms, working with a third-party servicer should be a straightforward experience.

In a nutshell, while the process may seem complex, having a solid loan servicing team can make your life a whole lot easier. Just remember: whether you’re making payments or needing support, these folks are there to help you navigate your mortgage journey.

Give our team at Tomo Mortgage a call to get started today: 737-510-2523

If you’re ready to start your journey to homeownership, get pre approved with Tomo Mortgage today.