About The Loan Process
Pre-Qualification
Pre-qualification occurs before the loan process actually begins, and is usually the first step after initial contact with the lender is made. Before you contact your loan officer, have these things in hand: Current month's pay stubs, W-2's for previous two years, last 2 month's bank statements. Over the phone or in person, your loan officer gathers information regarding your income, assets and debts, reviews your credit report and discusses the expectations you personally have. An analysis of this information will help determine how much house you may be able to afford. The pre-qualification process will also help to determine which loan program will best fulfill your specific needs.
Loan Application
The application is actually the beginning of the loan process and usually occurs between days one and five of the loan. You, now referred to as the "borrower", complete a mortgage application, supply all of the required documentation for processing, and sign any essential disclosures. 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 itemize the rates, associated costs for obtaining the loan, pre-payment options, and late fee penalties.
Loan Processing
Processing typically occurs between days 5 and 10 of the loan. The "processor" reviews the credit reports and verifies the borrower's debts and payment histories. A written explanation from the borrower will be required if there are unacceptable late payments, collections for judgments, bankruptcies, etc. The processor's job is to put together an entire package that may be underwritten by the lender.
Underwriting
Lender underwriting generally occurs between days 5 and 20 of the loan. The underwriter is responsible for determining whether the combined package passed over by the processor is deemed as an acceptable loan. If vital information is needed to approve the loan, it is given a "suspense" status and the loan officer is contacted to supply more documentation. If the loan is acceptable, it will be given an "approved w/conditions" status and the loan officer will receive documentation regarding the "stips" or "conditions" required to approve the loan and give it a "clear to close" status.
Fulfilling Conditions
All loans come back to the loan officer with conditions! Typical conditions include an appraisal, title work, verification of employment, etc. Some loans only have a few conditions, but more than likely it will be returned with many conditions (upwards of 30 or 40!). Fulfilling these conditions can be tedious and somewhat stressful, and many of them cannot be completed without help from the borrower. Your loan officer will review the conditions to determine which ones can be executed without assistance. Then, to keep things moving, they will present you with a short list of things you may be able to do to help satisfy some of the conditions. Generally, it takes about two weeks for the loan officer to complete all the conditions, so don't stress yourself out by trying to do everything at once. Go down the list one-by-one and try to get any requested information to your loan officer as soon as possible to prevent any delay in your closing date.
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 commonly occurs between days 25 and 30. Once all of the conditions have been returned to the underwriter, the loan will be given a "clear to close" status. The loan officer will then get the title insurance ordered, review the HUD statement for any errors, and schedule a closing time.
Closing
Closing usually occurs between days 25 and 45 of the loan. Your loan officer will meet with you about 30 minutes before the closing to go over the HUD statement, ensure your approval of all the figures and explain the procedures of the closing. Be sure to BRING YOUR DRIVER'S LICENSE OR I.D. and also a CASHIER'S CHECK made out to the title company for the amount of money needed to close the loan. At the title company, 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. Congratulations! You just bought your new house!
jessica@amstn.com
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