The Loan Process
- Pre-Qualification
- Application
- Required Documents
- Loan Processing
- Loan Underwriting
- Loan Closing
- In Summary
Pre-Qualification
The prequalification has different aspects to it. In addition to gaining the information on whether or not you will qualify for the loan you will also find out what documentation is needed when you start the loan process. Different loan programs may require different documentation so it’s wise to know up front what you will need instead of starting the loan process only to find out you will not be able to provide the correct documents. The borrower's income and debt information will be used for this valuation along with work and housing history.
In order to qualify a borrower for their desired loan amount and the type of mortgage requested, mortgage companies review the gathered information and focus on the borrowers ability to repay the loan by looking at the debt-to-income ratio first then taking other factors of the loan guidelines into consideration.
There are many variables, so borrowers should realize that loan requirements are guidelines for the determination of loan approval. Each application is considered on the basis of its own merits. In some cases a borrower’s stronger attributes can make up for some weaknesses.
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In Summary
Completing your loan application is the first step in the loan process. Your mortgage professional will assist you in completing the application should you have any difficulties. The borrower will receive a Good Faith Estimate (GFE) and a Truth-In-Lending Statement (TIL) within three days of the signed loan application submission to the lender. The estimated costs are detailed to the borrower on the GFE. At this point you will be requested to provide the necessary documentation to originate the loan.
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Required Documents
For most purchases or refinance loans, when the borrower is salaried, the past two-years W-2’s and one month of pay-stubs will need to be provided. If the borrower is self-employed, the past two-years tax returns will be needed unless you are going with a stated income loan. Also, Rental Agreements and the past two-years tax returns should be provided if you own rental property. A borrower can expedite the loan approval process by providing the past three-months bank, stock and mutual fund account statements, as well. Be sure to include the most recent copies of any stock brokerage, IRA and/or 401k accounts. A borrower requesting cash-out will need to tell the lender what the use of the money is going to be. For a refinance you will also need to provide a copy of your most recent mortgage statement so the Title Company or closing attorney can order a payoff.
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Loan Processing
The loan processing begins once the signed application and disclsosures along with your rquired docs have been sent back to your loan officer. The Loan Processor will verify all information on the loan application against the income and other docs provided by the borrower for accuracies. Now the processor can move forwad with ordering title work and the appraisal. The processor will examine the Appraisal and Title Report to address any property issues that may require further investigation. Upon completion, the Loan Processor will put together the entire mortgage package for submission to the underwriter.
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Loan Underwriting
The processor submits the complete package to the underwriting department. It is then reviewed by the underwriter to insure the loan meets the guidelines for the program chosen. Should the underwriter determine there are in discrepancies on the file, he/she will require additional information from the processor. Usually this is done with a conditional loan approval and the conditions of the loan are stated. And as such the processor or loan officer will contact the borrower if needed to provide the docs needed to move the file to closing. Once the underwiter has determined all docs are complete according to the guidelines and state and federal regulations then the underwriter will move the file to closing.
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Loan Closing
Upon loan approval, the file is forwarded to the closing department. The closing verifies the broker and closing fees. Then they will have docs drawn and sent to the title company (or closing attorney). The Title Company or closing attorney will then schedule the closing with the borrower. The title company will provide a settlement statement called the HUD1 which will outline all fees and give the borrower the bottom line figure needed to close the loan.
List of Items needed at closing
- Cashiers check for your down payment and closing costs if this is a purchase or in some cased refinances where money is needed to close the loan. This has be brought in certified funds NOT a personal check or money order
- Bring your personal identification with you.
- Bring any parties to the transaction who will need to sign
Once the documents are signed, the Title company (or closing attorney) returns the documents to the lender’s funding department who then examines the file to verify it is correct. The funding department then issues a funding number so the Title Companyt can fund the loan.
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In Summary
As you can see we have outlined the basics of the loan process. This should give you a good idea on what the loan officer needs to evaluate your loan and give you a Pre-qualification letter. Should you have any questions please contact us by clicking the link below:
Contact us now to qualify for a home mortgage!
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