Understanding the Loan Process

Pre-Qualification
Prior to getting a loan and generally prior to searching for a home, pre-qualification occurs to determine what type of loan can be obtained. The lender will gather information about the income and debts of the borrower. This allows him or her to make a financial determination about how much money the borrower can obtain for purchasing a home. There are numerous loan programs can lead to different results, which is why we recommend a pre-qualification for each type of program you are suited for, this will provide you with your best options.

Application
The first step of the loan process is the application. The buyer (borrower) completes a mortgage application with the loan officer and supplies all of the required documentation for processing. 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 itemizes the rates and associated costs for obtaining the loan.

Processing
The processing occurs between days 5 and 20 of the loan, on average. The step involves the processor reviewing the credit reports and looks at the borrower's debts and payment histories. If the processor sees any speed bumps, like late payments or unpaid debt, a written explanation is required from the borrower. The processor reviews the appraisal and survey and checks for property issues that may require further explanation. When done, the processor, will have placed together an entire package that may now be underwritten by the lender.

Underwriting
Lender underwriting occurs between days 21 and 30, on average. The underwriter is responsible for determining whether the combined package passed over by the processor is deemed as an acceptable loan. If more information is needed, the loan is put into "suspense" and the borrower is contacted to supply more documentation. 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.

Pre-Closing
Pre-Closing occurs between days 25 and 30. During this time the title insurance is ordered, all approval contingencies, if any, are met, and a closing time is scheduled for the loan.

Closing
Closing usually occurs between days 25 and 45 of the loan. At the closing, the lender funds the loan to the selling party in exchange for the title to the property. This is the point at which the borrower finishes the loan process and actually buys the house.

Pre Qualification:
Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan. Also called: Adjustable Rate Loans, Adjustable Rate Mortgages (ARM’s), Flexible Rate Loans, or Variable Rate Loans.