The Loan Process Start To Finish
Seven Steps To A Mortgage
"Prequalification" occurs before the loan process
actually begins, and is usually the first step after initial contact is
made. In a prequalification, 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 prequalification for each type of program you
are suited for.
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 which itemizes the
rates and associated costs for obtaining the loan.
Opening The File
At this time the
lender orders a property appraisal, property survey and credit reports,
mails out requests for verifications, if necessary, for employment (VOE)
and bank deposits (VOD) and any other documents needed for processing of
the loan. All information supplied by the borrower is reviewed at this
time and a list of items not yet received is compiled.
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.
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.
"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.
this time the title insurance is ordered, all approval contingencies, if
any, are met, and a closing time is scheduled for the loan.
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
Closings occur at different places in different states. For instance, some
states require that the closing take place at a closing attorney's office
while others use a title or escrow company.