The Mortgage Loan Process
The process of getting a mortgage loan can seem complicated and difficult. As a seasoned mortgage loan officer, I know how to make the steps to getting your loan closed as easy as possible. I have processed hundreds of mortgage loans and know all the pitfalls to avoid. Here are the basic steps:
Pre-qualification is an estimate of the amount the borrower can afford when purchasing a house and the lender is willing to loan to the borrower.
A pre-qualification should be performed prior to starting the search for a house.
The pre-qualification process will give the borrower an idea of the price range of houses they can afford, what their down payment may be, the borrower’s approximate monthly payment,
and identifies which loan programs the borrower qualifies. During the prequalification process the lender will review information about the borrower’s income, assets, debts and potential down payment amount.
A pre-qualification does not commit either the borrower or the lender to entering into a loan.
Being pre-qualified for a loan makes you more attractive to the seller and enhances your offer on the property.
Documentation Recommended for Loan Pre-Qualification
In order to pre-qualify for a loan a borrower must have available documents including paystubs from the borrower’s employer, W-2’s, tax returns (if self-employed), Bank Statements,
401-K statement (or other investment statement), the borrower’s most recent property tax bill, and a few other documents.
The borrower meets with a mortgage professional to complete the application and provides all of the required documentation to the mortgage professional.
The mortgage professional will discuss with the borrower the fees and closing cost estimates at this time and additionally will discuss the loan options
available to the borrower and decide on a loan program and sign the loan documentation. Within a few days of filing the loan application, the borrower will receive the
loan estimate and the borrower will receive the loan estimate and the initial disclosures, which verify the fees and closing costs of the loan.
At this time the borrower has the option to lock in their interest rate on the loan or to float their rate and leave it to be locked in at a later date. Typically the best pricing for locks is available on the 30 and 45 day locks and knowing the closing date will determine which to choose. It is always a good idea to secure your rate as soon as possible to avoid a surprise increase in interest rates, as they may fluctuate from day to day.
Once the loan application has been filed, the processing begins. The Mortgage Processor will order the applicant’s (borrower’s) credit report, the home appraisal, and the Home title report and will verify the applicant’s documentation. The Mortgage Processor may request a written explanation from the applicant (borrower) if any of the items of the Pre-Qualification or 3rd party reports contains a discrepancy or contains negative remarks. The Processor reviews the Appraisal and the Title Report for property issues that require further investigation. The processor then submits the entire mortgage package and the documentation put together for the submission to the lender.
Once the underwrite receives the applicant/borrower’s file from the processor, they will review the loan to determine whether the applicant is an acceptable borrower. The loan officer may occasionally request more information from the applicant/borrower and the loan is placed in “suspense” until the requested information is received. The underwriter will review the loan application, the documentation, financial information of the borrower, the sales contract, the title, and the appraisal to ensure the necessary criteria and government regulations are met. If the loan application is deemed acceptable, the loan is “approved”.
Once the loan is approved, the borrower and the closing attorney are notified and the closing and broker fees are verified.
The closing attorney then schedules a time for the borrower to sign the loan documentation.
The borrower should bring the down payment and the closing costs in the form of a cashier’s check and his/her identification and proof of insurance to the closing.
The borrower should carefully review the loan documents for correctness and to ensure understanding prior to signing the document(s). The applicant then signs the loan.
The closing attorney returns the loan documents to the lender who examines them and arranges for funding of the loan.
The closing attorney then records the mortgage note and the deed of trust at the county recorders office.
Closing attorney then prints final settlement costs on the closing disclosures and final disbursements are made.