The Loan Process

The Loan Process

Pre-qualification

Pre-qualification occurs before the loan process actually begins. The lender gathers information about your income and debts, and makes a financial determination about how much house you may be able to afford.

It's a good idea to know how much of a home you can afford before you start shopping for one! If you are refinancing the loan on your existing home, then the pre-qualification process should help you decide whether refinancing is a good idea for you.

Application

The application is the beginning of the loan process and typically occurs before you have found a property you want to buy or have decided that you wish to refinance the loan on your existing home. You'll complete a mortgage application and supply all of the required documentation for processing. The loan officer will deliver a Good Faith Estimate (GFE) and a Truth-In-Lending Disclosure (TIL) within three days that itemize the rates and estimated costs for obtaining the loan.

Processing of your Estimated Loan

The lender will typically submit the application package to an automated underwriting system that will provide the lender with the necessary documentation needed for loan approval. In some cases, the lender may also manually underwrite an application package.

The lender's processor reviews the credit reports and documentation to verify your employment, debts, and payment histories. If there are unacceptable late payments, collections, judgments, etc., the processor will request a written explanation from you. The processor, at a later date, also reviews the appraisal and survey and checks for property issues that may affect final loan approval. The processor's job is to put together an entire application package for the lender's underwriter.

Underwriting

The lender's underwriter is responsible for determining whether the application package prepared by the processor meets all the lender's criteria. If more information is needed, the loan will be issued a "conditional approval" and you will be contacted to supply more documentation.

If the underwriter approves the loan, the lender issues a conditional commitment to lend, orders title insurance, works with you to clear all conditions to its commitment to lend, then schedules a closing time. Conditions to the lender's commitment may include issues with credit, income, or the property that may arise during the processing and underwriting process.

Closing

The closing will occur after all conditions are cleared and the lender issues a full loan approval. At the closing, the lender "funds" the loan with a wire transfer or in some cases a cashier's check or draft to the closing agent, who disburses funds, in exchange for the title transfer to the property. This is the point at which you finish the loan process and actually refinance or buy the house, subject to the lender's loan. Closings may occur at different locations 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. You may also be able to close at your home or business.