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Step By Step: The Loan Process
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.
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.
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.
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.
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