Loan Process

Step 1 Application

Loan Consultation

This is one of the most important parts of the mortgage process. Your Loan Officer will talk with you about current market rates and the different loan programs to help familiarize you with what is available in the market.  You will not need to make any loan product decisions at this time.  You will be asked about information pertaining to your income, expenses, assets, and liabilities.  If you are purchasing a new home, you will need to determine the amount of down payment you will be making towards your new home.  Your Loan Officer will help you understand how your financial information along with your credit history is used in qualifying you for a mortgage loan.

Pre-Qualification
It's a good idea to know how expensive a home you can afford before you start shopping for one, and a pre-qualification from a lender can help. If you can provide a pre-qualification letter, sales agents and sellers will know that you are an able buyer and may take your offer more seriously. A pre-qualification letter may sway a home seller to negotiate with you as opposed to another buyer who is not pre-qualified. If you are refinancing the loan on your existing home, then the prequalification process should help you decide whether refinancing is a good idea for you.

Loan Application

See the application checklist to assist you.
The application is actually the beginning of the formal loan process and should occur prior to finding a property you want to buy or when you have determined that you wish to refinance the loan on your existing home. With the help of your Loan Officer, you complete a mortgage application for a particular loan program and supply all of the required documentation for processing. Your Loan Officer will discuss various fees, rate-lock and down payment options with you at this time, and the Loan Officer will deliver a Good Faith Estimate (GFE) and an initial Truth-In-Lending Disclosure (TIL) that will contain an estimated annual percentage rate (APR) within three days of the date of your application that itemizes the rates and estimated costs for obtaining the loan. You may or may not lock the interest rate on your loan at this time.
 
The key form that you must complete is the loan application form itself (known as a ‘1003,’ from the Fannie Mae form number). The application identifies the property being financed, the borrowers, their employment information, their assets and liabilities, debt ratios, and other pertinent information that will support the decision on whether the borrower is financially able to maintain the payments. The property being financed is also being evaluated to see if it is adequate security for the loan. Clearly, it is vital that the loan application be complete and accurate. The next stages of the loan may go more quickly if there are no discrepancies or issues in the application. Your Loan Officer will order a credit report, which will show your payment history, credit limits, monthly payments, and current balances.
 
All lenders rely on credit information from national credit repositories obtained by ordering and reviewing a credit report for all the borrowers on the application. Lenders will compare the debt information on the application to the credit report and investigate and document discrepancies that are in the loan file.  Based on the information in the application, credit history (from the credit report) and other factors, your Loan Officer will evaluate all the available loan programs to determine the best product fit for you.
 

Step 2  Selection

Loan Product Selection
Your Loan Officer will guide you through the process of choosing the best loan product from one of the hundreds available.  This is accomplished with a software system called “automated underwriting” or AU. Once the Loan Officer has your loan application completed, the AU can run many different loan scenarios that mimic actual loan submissions to Lenders because the software understands each Lenders unique underwriting guidelines. The automated underwriting is done without actually submitting loan documents to any lenders and the process is completed within 24 hours. Automated underwriting is an important part of the process because it allows the Loan Officer to compare all products against each other in a real-time setting.  Once AU is completed, your Loan Officer will discuss the various loan options and you are ready to choose the best loan product based on your mortgage needs.
Here are a few items you need to consider before selecting a product:
1. How long do you plan to own the home?
2. What is your financial outlook for the near-term and long-term?
3. Do you have future financial obligations (such as college, retirement, elderly care) that might limit your future ability to meet debt obligations?
4. How comfortable are you with a payment amount that changes over time?
5. What is your liquid asset position? Are you willing to make a larger down payment?
6. How is your credit history?
7. Are you a first-time homebuyer?
8. Will you have adequate funds available after debt payments for retirement funding and other needs?

Interest Rate Lock

You have the opportunity to establish an interest rate guarantee or "lock" the interest rate during the loan process.  Keep in mind that interest rates may change somewhat each day. Only you can make the decision to lock the interest rate on your loan.

Keep in mind that interest rates can change at any time and without notice. Rates generally change a little bit each day, sometimes better - sometimes worse. Sometimes rates can change several times a day. If you know that the financial markets are going through a particularly volatile period, you may want to check with your Loan Officer periodically to make sure rates are at a comfortable level.

Step 3  Submission

Submit Loan Package

At this point, your application is complete, credit reports have been checked, your debt to income ratios support the property you are purchasing, and you have a purchase contract to submit with your application.  Your Loan Officer has guided you through the loan selection process with the help of “automated underwriting” software.  You have selected the best loan product and locked in your loan rate, if desired.  Your Loan Officer is ready, upon your approval, to submit the loan package.

Opening The File
At this time the Loan Officer opens escrow, orders a property appraisal, preliminary title reports, and 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.

Preliminary Title Report
A preliminary title report will be is ordered by your Loan Officer, which means that a title search will be underway. Normally this takes about 3 to 5 days. It can take longer however, if there are any judgments or liens on public record against the property.

Verifications

The Loan Officer will verify the information disclosed on your initial loan application (i.e. income, assets and liabilities, employment, and bank deposits).
     
 Appraisal
The Loan Officer will order a property appraisal from a licensed real estate appraiser on the property in which you are purchasing. The appraisal is done to determine the value on the property being purchase and your loan amount.

Step 4  Processing

Loan 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 checks for property issues that may require further discernment. The processor's job is to put together an entire package that will be reviewed by the underwriter.

Underwriting

The underwriter is responsible for determining whether the combined package passed over by the processor meets all the lender's criteria.  A loan decision will be issued based on four factors - income, assets, credit record, and property value. An Underwriter will review the information on your loan application and the information collected on your behalf. If more information is needed, the loan is given a "conditional approval" and the borrower is contacted to supply more documentation. Additional information or documentation as required by the loan program guidelines may be requested.  These conditions must be removed in order to receive funding approval.

"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 (PMI) to the lender in case of default. As above, if more information is needed the loan goes into “conditional approval”.  These conditions must be removed in order to receive funding approval.

Loan approval

At the loan approval stage, a title/escrow company, a neutral third party, is assigned to ensure that all parties receive what they are entitled to. Your Loan Officer will check with you to schedule the signing of the loan papers at the location of your choice.  Documents are then ordered and submitted to the title/escrow company, giving the title/escrow officer at least 24 hours to review the documents, comply with the lender’s instructions, and draw up the papers for your signature. 

Pre-Closing

Before the closing, schedule a final walk through of your new home to make sure it is ready for you and to ensure that any contingencies specified in the commitment letter about the home’s condition have been satisfied.
Prior to the closing you must obtain homeowner's insurance with a carrier of your choice. This information must be provided to your Loan Officer or Escrow Agent within 72 hours of closing. Your Loan Officer or Escrow Agent will provide you with the amount you will need to bring to closing. Funds needed for closing must be in the form of a certified check or cashier's check.  Your Escrow Agent will go over the settlement charges with you and have you execute the Lender’s Note and other applicable closing documents.

Step 5  Closing

Closing•

 Signing
At closing, you will sign the documents necessary to complete the transaction.  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.
• Funding
Once you have signed the documents, the title company will send the completed papers back to the lender for funding.  In this process, the lender confirms that all its instructions to the title company were followed and “funds” the loan.  The title company then disperses the funds strictly per written instructions.
• Recording
The next day, the title company records all legal documents that have been executed and records a conveyance on all old liens.  Once the new loan (and grant deed in the case of a purchase) has been recorded, the loan and escrow are considered closed.