Pre-Qualification
Pre-qualification occurs before the loan process actually begins, and is usually the first step after initial contact is made. The lender gathers information about the income and debts of the borrower and makes a financial determination about how much house the borrower may be able to afford. Different loan programs may lead to different values, depending on whether you are qualified for them, so be sure to get a pre-qualification for each type of program you are suited for.
Understand that in order to finance or refinance a loan the lender requires documentation to verify and substantiate your employment, credit and financial situation to assure its investors that you have the ability to repay the money. This documentation may consist of tax returns, recent pay stubs, bank statements, verifications of employment, deposit and rent or mortgage, appraisal, purchase agreement, divorce decrees, bankruptcy papers and any other information the lender deems necessary.
Application
The application is actually the beginning of the loan process and usually occurs between days one and five of the loan. The buyer, now referred to as a “borrower”, completes a mortgage application with the loan officer and supplies all of the required documentation for processing. Various fees and down payments are discussed at this time and the borrower will receive a Good Faith Estimate (GFE) and a Truth-In-Lending statement (TIL) within three days that itemizes the rates and associated costs for obtaining the loan.
Understand that you will have to provide a completed loan application and the requested documentation to your loan agent. The loan agent will be the intermediary between you, the borrower, and the underwriter.
Processing
Processing occurs between days 5 and 20 of the loan. The “processor” reviews the credit reports and verifies the borrower’s debts and payment histories as the VODs and VOEs are returned. If there are unacceptable late payments, collections for judgment, etc., a written explanation is required from the borrower. The processor also reviews the appraisal and survey and checks for property issues that may require further discernment. The processor’s job is to put together an entire package that may be underwritten by the lender.
Underwriting
Lender underwriting occurs between days 21 and 30 or sooner. The underwriter is responsible for determining whether the combined package passed over by the processor is deemed as an acceptable loan. If more information is needed, the loan is put into “suspense” and the borrower is contacted to supply more documentation.
The underwriter is the person who goes through the documentation and information you have provided with a fine-tooth comb to make sure everything fits the program requirements. You will not be able to speak with underwriter – it is the loan agent’s job to communicate information to and from the borrower.
Expect to be asked to provide additional items. Once you give these to your agent, it will be a few days before you hear back again. The underwriter may come back to the agent several times with certain “conditions.” Don’t be concerned. The underwriter is simply doing an underwriter’s job. At this point, what you have is conditional approval – meaning, your loan is approved pending removal of these conditions.
Mortgage Insurance
Mortgage insurance underwriting occurs when the borrower has less than 20% of the loan amount to put towards a down payment. At this time, the loan is submitted to a private mortgage guaranty insurer, who provides extra insurance to the lender in case of default. As above, if more information is needed the loan goes into suspense. Otherwise it is usually returned back to the mortgage company within 48 hours.
Pre-Closing
Pre-Closing occurs between days 25 and 30. During this time the title insurance is ordered, all approval contingencies, if any, are met, and a closing time is scheduled for the loan.
Closing
Closing usually occurs between days 25 and 45 of the loan (depending upon the designated length of your escrow). At the closing, the lender “funds” the loan with a cashier’s check, draft or wire to the selling party in exchange for the title to the property. This is the point at which the borrower finishes the loan process and actually buys the house.
Realize that once the loan is approved, the loan papers will be sent to the escrow/title company or your attorney. The escrow officer or attorney will add other documents to the file created from information received from the lender. Once these documents are prepared, the escrow officer or attorney will contact you to set up an appointment for you to come in and sign your papers.
Expect to wade through and sign a mountain of papers. The escrow officer or attorney should provide you with a copy of everything you sign
Understand that from the date you sign your papers, it will be another two or three days until the loan is funded, which is when the money is transferred. Once the loan is recorded, the transaction is complete.
