The Loan Application Process
Mortgage approval involves a series of steps that allows the lender to make an intelligent decision about lending their funds to the borrowers. These steps are as follows:
Interviewing and Qualification
The Loan Consultant requests information from the borrowers to evaluate their situation and inform them of their financing options. Basically this information falls into four categories:
- Employment History
- Credit Report
- Income
- Assets
Based on this information the Loan Consultant will calculate the borrowers' housing and debt to income ratios to determine if they fall within the lender's guidelines. This is a very important step that allows the Loan Consultant to determine what type of loan programs will meets the borrowers' needs and maximize their loan amount.
Pre-Qualification Certificate
If the borrowers' financial situation is satisfactory according to the lender's guidelines, a Pre-Qualification Certificate will be provided to them and their Realtor. If the borrowers are not working with a Realtor, we recommend one of our Realtor-Partners to our borrowers. The borrowers can now have the confidence that they are likely to be approved and proceed to work with their Realtor to find an appropriately priced home.
Application
The application provides details about the borrowers and their financial position. The Loan Consultant will request documentation such as tax returns, W2's, current paycheck stubs, bank statements, etc. The borrowers will be provided with a Good Faith Estimate and Truth in Lending Statement. These disclose the details of the cost of the loan, monthly payments and funds needed to purchase the home. The borrowers will also be signing additional disclosures regarding the loan, including federal notices.
Processing
The loan file is examined to ensure that the information is complete, accurate and meets lender requirements. Verifications are ordered from employers, landlords, banks, etc. to document the information on the application. The Processor also orders the appraisal, flood report, opens escrow and requests title insurance.
Underwriting
Underwriting involves the evaluation of all the documents that make up the file to determine if the loan should be approved or denied. Documentation is reviewed for completeness, accuracy and legibility. Many loans are credit pre-approved before the borrowers pick their future home, negotiate the purchase and sale and request that the appraisal be done. With underwriting there are four factors:
- Collateral: The underwriter reviews the appraisal, which discloses the current market value and condition of the property. The lender uses this as a basis to establish the maximum loan amount.
- Capacity: An evaluation of the borrowers' ability to repay the loan.
- Character: An evaluation of the borrowers' credit report which shows the payment history.
- Capital: The liquid assets which the borrowers will be using for the down payment and closing costs.
Loan Approval
After all the underwriting factors have been carefully evaluated, the underwriter will make a decision to approve or deny the loan.
Status Reports to the Borrowers and the Realtor(s)
The Loan Consultant will keep the borrowers and the Realtors informed of the progress of the loan by fax, phone or email.
Escrow Closing and Funding
This is the final step to obtaining your mortgage loan. The Escrow Company will arrange the signing and recording of all the closing documents. The funds will be disbursed and title will pass from the sellers to the borrowers. At the same time, the borrowers will be making a legal obligation to repay the mortgage. Typically loan processing takes between three to six weeks.