The
Loan Process Start To Finish
Seven
Steps To A Mortgage
1. Prequalification
"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,
so be sure to get a prequalification for each type of program
you are suited for.
2. 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 which itemizes the rates and
associated costs for obtaining the loan.
3. 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.
4. Processing
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.
5. Underwriting
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.
6. Pre-Closing
During this time the title insurance is ordered, all approval
contingencies, if any, are met, and a closing time is scheduled
for the loan.
7. Closing
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.
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. |
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