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How Does The Mortgage Loan Application Process Work?Loan Officers and Realtors agree that it is best to have prospective homebuyers pre-qualified for a mortgage before they start looking for a home. This allows the Realtor to focus the home search in the correct price range. After helping the buyers and sellers negotiate an Accepted Offer to Purchase, the Realtor gives way to the Loan Officer. The following steps occur in securing a mortgage loan approval for the homebuyers. Step 1- Origination: The homebuyers meet with the Loan Officer (L.O.) and complete a mortgage loan application referred to as the 1003 (Uniform Residential Loan Application). The 1003 is the main document that determines of the rest of the mortgage origination process. The homebuyers should have all the supporting documents which the LO has requested at this appointment. (W-2’s, Bank Statements etc.) Providing this information at the initial meeting not only “paints a picture” of the borrowers and the property being financed but will also help to expedite the entire process. Step 2- Processing: This is where all the information used to make a loan decision is centralized and organized into a single file or loan package. Once the application has been taken, a complete file is given to the Loan Processor. The information on the application is verified- written verification forms are sent to employers, depository institutions, and creditors. A credit report is ordered to confirm that the applicants pay their debts in a timely fashion. An appraisal is obtained to verify that the property value will support the loan being requested. During this process, questions may be raised and the buyers may be asked to provide explanations and / or additional documentation. This is a normal occurrence and buyers should be reassured that this does not have to be a “bad sign”. The processor then reviews the 1003 information for accuracy against all the various support documents and hands the complete loan file off for underwriting or validation. Step 3- Underwriting: The Lender’s Underwriter reviews and examines the information contained in the file to determine the investment quality (credit risk) and whether or not the loan conforms to the investor’s required guidelines. The underwriter’s evaluation process will focus on three critical areas of risk including: credit (the borrower’s willingness to repay the loan in accordance with the loan terms based on their prior use of credit), capacity (the borrower’s ability to repay the loan based on the amount and stability of income and availability of reserves) and collateral (the property’s value and marketability to provide adequate security for the loan based on an appraisal). Occasionally, the Underwriter will ask for additional information before rendering a decision. Again, this is normal and should not be cause for alarm. Once the Underwriter is satisfied that the loan meets the necessary standards, the loan is approved and written notification is provided. This notification is called a Loan Commitment. Step 4- Closing: Upon receiving loan approval, any conditions the Underwriter issues must be satisfied. These conditions should be dealt with quickly because the closing time and date are not set until the conditions are satisfied. Once the closing is set, the listing Realtor or the LO will work with the closing agent to prepare the necessary documents to transfer money between the different parties involved in the purchase or refinance transaction. At the closing, numerous documents are signed to reflect both the repayment terms of the mortgage and the purchase of the home. Once the documents have been signed, the Sellers receive the proceeds of the sale and the Buyers receive the keys to their new home! The entire Mortgage Loan Application Process normally takes 2-5 weeks from application to closing. This time period can often be shortened if circumstances require it. This is a cooperative process between Buyers, Sellers, Realtors and Lenders. Apply Online at our secured sight- www.idealfinancial.com
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