The Home Loan Process
Intimidated by the loan process? We understand and we have your back. Here is a brief run through on what to expect when getting a mortgage loan. Keep in mind, each loan is unique just like every person is unique and because of this, the loan process may need to adapt to the individual we are working with. This is a general idea of the loan process.
Application – this is the very first step! When a new potential borrower is ready to see what they can qualify for, it is time to take the guess work out of the way and fill out an application. Be as detailed as possible. Your Loan Officer will call with questions once they receive your application. This is normal and allows you to share details they need to understand your financial situation.
Credit and Prequalification – Upon receipt of the application, your Loan Officer will “pull” credit. We pull all three bureaus which include TransUnion, Equifax and Experian. Once we have the credit score, now the Loan Officer can start figuring out what Program (FHA, USDA, VA or Conventional) is the best option for you. Once they have it narrowed down, they will get with the consumer to go through the potential options and terms. At this point, a Prequalification letter can be issued. This Prequal letter will be used to show the Realtor, Seller or other interested party that you have applied for a loan and we have determined you do qualify.
Contract – House hunting can be fun! It can also be exhausting, but once you find the home you love it is time for the contract to be written. Hopefully you have a Realtor to help you with this. If there are not any Realtors involved, then we suggest having a Real Estate Attorney to assist you. If you are writing the contract yourself, there is nothing wrong with this. Representing yourself is more than acceptable, just remember this is a legal and binding contract. Once both parties have accepted the terms of the contract, this needs to get to your Loan Officer.
Initial Disclosures – This sounds unpleasant, but it really is not. It will be a lot of reading on the borrower’s part. Using an electronic delivery service we will send out a packet of disclosures that will identify the terms of the loan you are applying for along with the estimate of the closing costs. There are many disclosures included that cover mortgage insurance, homeowner’s insurance, fees and other program specific details. Your Loan Officer will be available to answer any questions you have. Do not hesitate to ask your questions. We want you to understand and gain knowledge about the loan you will be getting. If you are more comfortable signing the disclosures in person, your Loan Officer can accommodate for this if you are located in their branch area.
Needs List – This is our term for the list of documentation we need from a borrower. By this point, you may already have provided several documents to your Loan Officer as part of the prequalification request. Unfortunately, most documents do expire according to our underwriting guidelines and must be updated every 30 days or so. Your Loan Officer will give you a list at this time for any documents needed with the goal to get your loan into underwriting within 2 – 3 days from the time you sign your loan disclosures. This can only happen with your assistance. When you are presented with a Needs List, please get the items on the list back to your Loan Officer as soon as you can. Within 48 hours is ideal to keep the loan moving to meet closing deadlines. Delays in getting documentation from our borrowers have the potential to cause use to miss closing date deadlines.
Processing – Now that Initial Disclosures are signed and the items requested on the Needs List are coming in, the file is sent to our Processing Team. Our Processing Team will order appraisal, title commitment, verification of employment and complete a bunch of other tasks needed by underwriting. This step is when all the information contained in the application is validated and confirmed. Questions may arise at this step and if this happens, your Loan Officer or their Loan Officer Assistant will reach out to you for information. It is also possible that the Processor determines further documentation is needed based on the reports they pull or information that is updated as the file progress. Please provide the information we need as soon as you can to keep it moving forward.
Underwriting – This is the step that the Loan Officer and Processor have prepared the file for! The underwriter is the final decision maker on the loan application. They will review the file once the processor has it ready to send to them and determine if the file will be approved, suspended or denied. We rarely see denials at this point, but it does happen on occasion. Approved with conditions is the normal outcome of the underwriting review the first time they see the file. A suspended file only happens when the underwriter cannot calculate income and that is usually due to a piece of documentation was missing to help them understand the income clearly.
Approved with Conditions – This means the underwriter found your file to meet the program guidelines but needed more information to clarify or document circumstances regarding your application information. Your Loan Officer or LOA (Loan Officer Assistant) will provide you with a new “Needs List’ outlining what is needed from the borrower to meet the conditions. Again, timeliness is important! The faster we get the needed information, the faster we can get the file back into underwriting!
Underwriting (re-submission) – The underwriter will review the file with the new information provided and determine if the information clarified the points they needed or if it presented new information that triggered additional conditions needed. If all is satisfied, the next step will be final approval. It normally takes 2 – 3 times back in front of the underwriter to clear all conditions. The borrower may not know the different times the underwriter touches the file as we may be working on appraisal or title conditions!
Initial Closing Disclosure – Just before the loan is sent back to underwriting for final approval, the ICD or Initial Closing Disclosure will be prepared and sent to the borrower for review. The ICD is step 1 of 2 of the Closing Disclosures the borrower will review. This initial one will contain the closing figures that we have gathered through invoices and statements to show the preliminary final figures as we know them. Usually, we are very close to what the final CD figure will be for cash to close. This form will need to be signed by the borrower(s) and returned to the Loan Officer before we can schedule any closings. This will be sent our via electronic delivery unless the borrower has a different preference.
Final Approval – Also known as the Clear to Close, this is one step closer to closing the loan. This means that the Underwriter has cleared all outstanding conditions and provided a final approval. Your Loan Officer is now ready to wrap this up and will start notifying all parties to coordinate the closing date and time.
Closing Confirmation – this step will all happen internally. We will set up the closing with our Closing Department, the title company and start the process between these two for preparation of the Final Closing Disclosure. During this stage the closing instructions and documents will be sent to the Title Company in advance of the actual closing.
Closing Day – Congratulations! You have become a homeowner! Make sure you take your Driver’s License to the closing along with a cashier’s check for any funds your Loan Officer told you would be required. Prepare for about 30 – 40 minutes of reviewing documents and signing papers. As part of this process, our Funding team will review a specific list of documents to make sure they were signed and dated correctly. You will be asked to wait while we do this as we don’t want you to have to come back in to sign a document if we can help it. Overall, the closing process should take about an hour to an hour and a half, depending on questions that may be asked and discussion that occurs at the closing table. Again…ask questions! We want you to understand your loan!
First Payment – your first payment will be due anywhere from 30 – 60 days from the day you closed. In your packet from the title company will be a “Payment Letter to Borrower”. Make sure you find this and put it with your bills to pay. It will identify where to send the payment and the due date.
We hope the process was painless and educational. With all the rules and regulations, the process can be very frustrating for consumers. We understand and recognize this fact. We will try to keep it as very simple as possible as well as explain the steps so you don’t feel lost. Although we must ask for documentation throughout the loan process, please know that we will only ask for what we must have to complete the loan process. It is very helpful if borrowers forward their pay stubs and bank statements as they become available as the underwriter will always want the most updated versions of these documents.