Strategies to Reduce Loan Origination Costs

As loan origination costs continue to rise in mortgage lending and other sectors, lenders face significant challenges. They must deliver quick, accurate decisions while keeping expenses under control. Even small inefficiencies—like ordering unnecessary reports or rescoring an application to correct errors—can drive up costs and frustrate borrowers.

Given how competitive the market is, upset applicants have more freedom to walk away. They can choose to work with another lender or abandon the application altogether.

The good news is that there are many tools and strategies to help reduce costs without impacting the borrower experience. We’ll discuss three strategies to support lenders in their cost-cutting efforts. These strategies help maintain speed, accuracy, and compliance for every application.

Bundle Your Services for Better Pricing

The loan origination process has many moving parts. Lenders often juggle multiple vendors and invoices for credit reports, employment verifications, and other critical services. These inefficiencies can add up quickly, costing lenders time and resources. They also complicate the management of internal teams.

Finding the right bundled loan origination services can help lenders consolidate essential services into a single solution. This streamlines ordering and helps lock in lower pricing for the reports and services they need the most. Additionally, it reduces the number of vendors used and the administrative burden of managing all those moving parts.

We focus on designing efficient solutions throughout the loan origination lifecycle. Our bundled pricing delivers real value to internal stakeholders and customers. By offering flexible bundles, we ensure lenders only pay for services they use. This simplifies billing while improving turn times and reducing waste.

Start with Soft Credit Pulls to Pre-Qualify Applicants

Credit checks are one of the first steps in the loan origination process. They provide lenders with insight into a borrower’s financial health and ability to repay. However, not every situation calls for the same type of credit report. By strategically using soft pulls and hard pulls, lenders can control costs, protect borrower credit scores, and streamline the application process.

During the pre-qualification stage, the goal is to quickly determine whether a borrower meets the basic criteria to move forward. A soft pull is ideal here because it provides a high-level view of the borrower’s credit history. It does this without impacting their credit score or triggering solicitations from other lenders. Soft pulls are traditionally less expensive and can help lenders identify qualified applicants before committing more resources.

Once a borrower is pre-qualified, the loan origination team can proceed with a hard pull. This pull provides a credit report, including trended data. These reports are more expensive and appear on the borrower’s credit report as a hard inquiry.

By starting with a soft pull and reserving hard pulls for qualified applicants, lenders can reduce origination costs. This approach improves decision speed and delivers a smoother, more borrower-friendly experience. Service 1st offers robust credit solutions, including credit report cascades and single bureau credit reports. These solutions help lenders save time, money, and resources at the beginning of the loan lifecycle.

Use Cascades to Streamline Verification Workflows

Lenders can create smarter workflows for verification by incorporating automation through cascade technology. Verification of employment (VOE) and income (VOI) can be cumbersome. Having an automated tool to identify the most cost-efficient and fastest verification method is essential to confirm a borrower’s ability to repay the loan.

For instance, if an initial attempt to access a database for income or employment information fails, the system will automatically “cascade” to a different verification method. This includes manual verifications if necessary. The same logic applies to credit cascades, where the system starts with one bureau before moving to merged credit reporting if the applicant meets preset criteria.

This automated progression ensures lenders only pay for more robust (and often more expensive) services when truly necessary. It eliminates unnecessary expenses and could potentially speed up the verification process. This reduces the cost of each loan processed and allows internal team members to focus on more complex tasks.

At Service 1st, we support a wide range of verification cascades that scale to each lender’s size and needs. They are designed to integrate with loan origination systems (LOS) and custom platforms. For more information, check out this post about different verification cascades and how our solutions support various types of verification. This speeds up the process and reduces unnecessary costs.

Smarter Loan Operations for Lasting Savings

Cutting costs in loan operations means working smarter. By adopting strategic bundling, verification and credit reporting cascades, and a balanced approach to pulling credit reports, lenders can reduce expenses while maintaining accuracy and compliance.

When paired with automation and advanced technologies, these strategies don’t just save money. They streamline processes, minimize risk, and improve decision-making. All of this is done while delivering a smoother, more transparent experience for borrowers.

Contact the Service 1st team today to discuss your challenges and goals for lowering origination costs. We will work side-by-side with you to determine the best products and services to meet your needs.

Conclusion

In conclusion, lenders can significantly reduce loan origination costs by implementing these strategies. Bundling services, starting with soft credit pulls, and utilizing cascade technology are effective methods. These approaches not only cut costs but also enhance the borrower experience. By focusing on efficiency and automation, lenders can thrive in a competitive market while maintaining high standards of service.