Loan Process

Pre-Qualification:

Pre-Qualification is usually the first step in starting the loan process.  This is where the lender gathers information about your income, assets and debt structure. They use this information to determine if you can qualify for a mortgage. Lenders look at two key factors; your ability to repay the loan and your willingness to repay the loan. Most Pre-Qualifications can be completed over the phone or by sitting down with your preferred lender. Although it only takes a few minutes to complete, it does not include verification of income, assets, or credit history. Please note that a Pre-Qualification does not mean that you have been Pre-Approved.

Click here: Pre-Qualification vs. Pre-Approval

Application:

Once you determine you can qualify for a home purchase or refinance, your next step is to make formal loan application. The application actually marks the beginning of the loan process. Your lender representative will help you complete the 1003 loan application, which is a collection of your personal information and the information provided at the time of Pre-Qualification. At this time you will be asked to provide supporting documentation in order to verify the information stated on your loan application. You should also expect that your lender representative review with you the various options and fees associated with each program. After you make formal loan application your lender is required to produce a Good Faith Estimate (GFE) and Truth-In-Lending (TIL) disclosures within three days. These statements should be a direct representation of the program that you selected at loan application.

Click here: Required Documentation

Processing:

Once your application and supporting documentation have been submitted to your lender, processing will take over your file. At this point your processor will review your credit report verifying your debts and payment history. They will also order your appraisal, set up title and escrow, and order verifications of employment (VOE), verification of deposits (VOD), and verification of rental history (VOR). Your processor’s job is to gather all the required pieces for file submission to underwriting, and also to serve as your intermediate party between your Loan Officer and Underwriter.

Underwriting:

The underwriters are responsible for determining if your loan meets lenders’ requirement issued by Fannie Mae and Freddie Mac, the government sponsored agencies. They will review the validity of your documentation submitted by processing and either approve your file, ask for more supporting documentation, or decline your file if it is out of the lender guidelines. This can be a frustrating stage for many especially if your underwriter calls for further explanation or documentation on specific items in your file. Remember that in the wake of the Mortgage/Real Estate crisis we have experienced a lot of process correction and are currently in a state of over documentation. Lenders are very skeptical of all borrowers at this point. If you are lucky enough to move swiftly through this process, this is where your Pre-Qualification turns into a Pre-Approval and your file is allowed to move Closing.

Closing:

Once all conditions have been satisfied with Underwriting and you receive full approval and is cleared to close, your file will be transferred to the funding department.  The Funding Department will verify the specifics of your loan program and closing fees to make sure everything is correct. If everything looks good, documents will be produced and sent over to escrow for signing. Escrow will then prepare your documents for signing and schedule a time for you to execute your final loan documents. After the documents are signed, escrow will return the package to the lender for final review by the funding department. If all prior to funding (PTF) conditions have been satisfied and everything else is in order, funding of your loan will be scheduled and funds distributed. After funds have been distributed escrow will arrange the recording of your note and deed of trust with the county.

Very important to note that your signing date and funding date are usually not on the same day. On a smooth purchase transaction you should be signing at least 48 hours before your funding date so it allows your lender ample time to review your package and deal with any last minuet funding conditions. On a refinance you have a three day right of rescission before you can fund, unless it is a non owner occupied (NOO) property. This means that if you sign your refinance on Monday it will not fund until that Friday so you need to make sure your interest rate lock is intact through the funding date and not the signing date.

%d bloggers like this: