THE LOAN PROCESS
Pre-qualification
Pre-qualification occurs before the loan process actually begins. The lender gathers information about your income and debts, and makes a financial determination about how much house you may be able to afford.
It’s a good idea to know how expensive a home you can afford before you start shopping for one! If you are refinancing the loan on your existing home, then the pre-qualification process should help you decide whether refinancing is a good idea for you.
The loan process
Application
The loan process initiates with the application, which takes place either after identifying a property for purchase or deciding to refinance your existing home loan. You submit a mortgage application tailored to a specific loan program, along with all necessary documentation for processing. During this stage, potential fees and down payment options are thoroughly discussed. Within three days, the loan officer provides a Good Faith Estimate (GFE) and a Truth-In-Lending Disclosure (TIL), outlining the rates and estimated costs associated with securing the loan.
The loan process
Processing of your Estimated Loan
Usually, the lender sends the application package to an automated underwriting system, which furnishes the necessary documentation for loan approval. Occasionally, the lender may manually underwrite the application package.
The lender’s processor examines credit reports and documentation to authenticate your employment, debts, and payment histories. If there are undesirable late payments, collections, judgments, etc., the processor seeks a written explanation from you. Additionally, the processor scrutinizes the appraisal and survey, identifying any property issues that might impact the final loan approval. The processor’s responsibility is to compile a comprehensive application package for the lender’s underwriter.
The loan process
Underwriting
The lender’s underwriter has the task of assessing whether the application package assembled by the processor aligns with all the lender’s criteria. In case additional information is required, the loan is temporarily placed in “suspense,” and you will be contacted to provide further documentation.
Upon the underwriter’s approval of the loan, the lender issues a conditional commitment to lend, initiates the title insurance process, collaborates with you to address any outstanding conditions to its commitment, and then schedules a closing time. Conditions to the lender’s commitment may encompass issues related to credit, income, or the property that might emerge during the processing and underwriting stages.
The loan process
Closing
The closing takes place once all conditions are satisfactorily addressed, and the lender issues a comprehensive loan approval. During the closing, the lender funds the loan through a cashier’s check, draft, or wire to the closing agent. The closing agent then disburses funds in exchange for the title transfer to the property. This marks the culmination of the loan process, and you officially complete the refinance or home purchase, contingent upon the lender’s loan.
Closings vary in location across states. For example, some states mandate that the closing occurs at a closing attorney’s office, while others utilize a title or escrow company. In certain cases, you may also have the option to close at your home.
