I have a web page that explains the mortgage loan process
and I thought it was comprehensive but I get at least one
question a day about the loan process. Perhaps it is
unclear because many things actually happen in parallel.
First of course, you should shop interest rates and find a
local mortgage broker that you feel comfortable with, is
experienced and reputable.
Application:
You go into the brokers/bankers office and you fill out a
1003 (loan application). You also bring copies of your
bank statements, retirement accounts, 401ks, W2s and tax
returns and what ever else the Loan Officer requested. The
Loan Officer makes copies of the documentation and gives
you back your originals.
An application can be filled out on line but I don't
recommend you do that. Filling out an "on line"
application is ok if you know whom you are dealing with and
they are local. This can save you a trip to the office.
But you should never just fill out an application on line
if you don't know who they are or if they are not local
(even if they are a major branded company). Do not
complete any request that suggest multiple offers as these
companies sell your information over and over.
During the time you sit with the loan officer he will
review your documentation and with most companies he will
pull your credit report while you are with him.
During your conversation the LO will tell you "based on the
information he has" that you qualify for "this type" of
loan. He should also at this time tell you about all loan
types you qualify for. He will also discuss interest rates
and terms. He will have you sign several disclosures.
At this point you guys decide on your course of action. HE
SHOULD AT THIS TIME GIVE YOU A GOOD FAITH ESTIMATE. The LO
then puts all your official paper work in the file and
turns it over to the processor.
Processing:
The processor makes sure all the documents are in the file,
puts the paperwork in order, enters it into DU or LP
(automated systems) and then receives an automated approval
or turn down. This is always "subject to" supporting
documentation including appraisal, inspections, and title
work.
The processor then verifies employment, verifies residence,
orders an appraisal, and orders a title. I won't go into
the documentation requirements here but this is when things
start to happen in parallel.
When the processor has received all these verifications,
the appraisal, and basic title work, they will review the
file again and if it still qualifies they will forward the
file to the lender's underwriter.
Note: At this point she does not have a title policy or
guarantee, but the title company has reported that there
are no clouds on the title. Shame on the processor if she
forgot to order this because it can delay your loan later.
The actual title policy is not issued until later when the
underwriter gives a "clear to close".
Underwriting:
The lender's underwriter then reviews what is in the file,
runs the numbers, and verifies that all of the
documentation is present and that it supports the DU or LP
approval.
They also review the appraisal and the title at this time.
This is part of the underwriting process. If there are
problems in the appraisal review or title they will address
them to the processor.
The processor will communicate with the LO and appraiser
and/or title company to resolve the issues. This is part
of the underwriting process. The processor collects the
requested "stuff" and then forwards all information to the
underwriter.
The underwriter is then happy and gives an "ok to close".
This ok is usually subject to receiving the title insurance
policy from the title company. The title company faxes or
transmits electronically the info to the lender. Then the
Lender sends the closing documents to the closing company.
This can sometimes take two to three days.
You have an appointment to close. You sign the documents
and your loan is closed and you get the keys.
Processing should only take a week after you have provided
all the documentation requested. The underwriting normally
takes about 14 to 28 days. This time includes
communicating with the processor if there are any
deficiencies.
Every loan file is different; each Lender has different
requirements and markets vary, so it is impossible to give
an exact duration for each step.
The Key: Understand the sequence and demand your loan
officer gives you full details about what is going on. If
you don't understand don't be afraid to say so. This is
YOUR investment. Demand the facts. LO's sometimes use
industry terminology, ask what they mean if you don't
understand!
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Connie Sanders is a strong advocate for educating the
consumer about mortgage loans before they apply for a loan.
Connie put together a mortgage information web site at:
http://www.mortgageunderwriters.com and can be contacted
there with any questions you may have.
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