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The Home Loan Process

Home Loan Process

Step 1: The APPLICATION

Once you have talked with a loan officer about the type of loan for which you want to apply, it’s time to start the home loan process. The mortgage lender will ask a series of questions and gather all of your personal information to determine for how much you can qualify.

Factors that effect your loan program:
• Down Payment Amount
• Credit Score & Credit History
• Employment History
• Income and Assets
• Debt as shown on your credit report

Step 2: Pre-Approval

Once the application is submitted and verified, you will receive a Pre-Approval letter showing the maximum interest rate, purchase price and loan amount. It’s now time to go house hunting and work with a Realtor to find your dream home.

Checklist:
Submit mortgage documents to the loan office.
Find your dream home!

Did you know?

It’s always better to get “Pre-Approved” instead of “Pre-Qualified”. Pre-Approved means that the loan officer gathered your income and asset information as well as pulled your credit in order to run everything through an on-line approval system such as Fannie Mae’s DeskTop Underwriter or Freddie Mac’s Loan Prospector. A “Pre-Qualification” does not do these things but, instead, gives you a “best guess” as to whether or not you will be approved for a home loan. A Pre-Approval carries more weight with a Seller than a Pre-Qualification does.

Your loan officer can also submit your file to an underwriter in order to get a very solid Pre-Approval. This level of Pre-Approval helps to make sure there is nothing in your income, credit or financial history that would prevent you from getting a loan.

Step 3: Loan Processing

At this point you are under contract on the home you want to purchase and it’s time to start processing the loan. You will sign a purchase agreement between you and the seller on the terms and conditions of purchasing the home. After that you will deliver an earnest money check to the title company. The earnest money check acts as a deposit on the home and helps fund your down payment. This process is known as escrow, when a third party holds on to the money, protecting both the buyer and seller on the purchase. Once you have provided the fully executed purchase contract to your loan officer for the house you want to buy, your mortgage lender will prepare both the loan estimate and the initial loan application documents.

The loan estimate is a 3 page document containing information about the loan amount, interest rate, how the loan will be repaid, and the closing costs. Before it can go to underwriting (next stage) the loan processor will review the file and may ask you for additional mortgage documentation to verify your ability to repay the loan.

If the loan you are applying for requires mortgage insurance, this is when the loan processor will order the mortgage insurance. VA Loans and Conventional Loans with a 20% down payment are not required to have mortgage insurance. Next the title work is ordered, an appraisal for the property is obtained, and the complete package is sent to underwriting for loan approval.

Check List:
Sign the Purchase Agreement.
Deliver your earnest money check to the title company
Provide mortgage documentation to the processor.
Read through the Loan Estimate and application so that you understand what you are signing.

STEP 5: UNDERWRITING

The file gets underwritten and your loan officer will typically receive a “Conditional Approval” naming any items that the underwriter wishes to see and review in order to approve your loan. Once these items have been submitted and reviewed, the underwriter issues a “Final Approval” for your loan and the loan then gets sent to closing.

Checklist
Provide any addition information to the underwriter to insure the loan is cleared for Final Approval.

STEP 6: CLOSING:

You have finally made it to the last step and are one step away from being a homeowner. You will receive a Closing Disclosure that is a five page document that must be signed before the closing. This document is similar to your loan estimate but includes additional information about the escrow component of the loan. You will have to sign this document at least 3 days before the closing. The next and final step is going to the closing.

The Closing Department will create the documents needed to close your loan and send them to the title company. The closing completes the process of obtaining a mortgage. Your Mortgage Consultant and Realtor will tell you what to bring with you, and the Title Officer will explain each document you’re signing.

Checklist:
Sign the Closing Disclosure before the closing and down payment.
Bring your photo id and cashier’s check for closing costs.

Tip:
Personal checks or cash are not acceptable form of payment for closing costs. Only a wire transfer or a cashier’s check will be accepted.
Signing the Closing Disclosure in a timely manner is important because it can delay your closing date if it isn’t signed within a certain time frame.