The Loan Process: A Step-by-Step Guide

Pre-Qualification

Pre-qualification occurs before the loan process begins. The lender gathers information about your income and debts to make a financial determination about how much house you may be able to afford. It’s essential to know your budget before shopping for a home. If you are refinancing your existing home loan, the pre-qualification process helps you decide whether refinancing is a beneficial option for you.

Application

The application marks the beginning of the loan process. This step happens after you’ve found a property you want to buy or have decided to refinance your current home loan. You will complete a mortgage application for a specific loan program and supply all required documentation. During this phase, various fees and down payment options are discussed. Within three days, the loan officer will provide a Good Faith Estimate (GFE) and a Truth-In-Lending Disclosure (TIL), which detail the rates and estimated costs for obtaining the loan.

Processing of Your Estimated Loan

The lender typically submits the application package to an automated underwriting system to gather the necessary documentation for loan approval. Sometimes, the lender may manually underwrite the application package. The lender’s processor reviews credit reports and documentation to verify your employment, debts, and payment histories. If there are any issues like late payments, collections, or judgments, the processor will request a written explanation from you. The processor also reviews the appraisal and survey, checking for any property issues that could affect final loan approval. The processor’s job is to compile an entire application package for the lender’s underwriter.

Underwriting

The underwriter is responsible for determining whether the application package meets all the lender’s criteria. If additional information is needed, the loan is put into “suspense,” and you will be contacted to provide more documentation. Once the underwriter approves the loan, the lender issues a conditional commitment to lend, orders title insurance, and works with you to clear all conditions. Conditions may involve issues with credit, income, or the property that arise during processing and underwriting.

Closing

Closing occurs after all conditions are cleared and the lender issues full loan approval. At the closing, the lender “funds” the loan with a cashier’s check, draft, or wire transfer to the closing agent, who disburses the funds in exchange for the title transfer to the property. This is the final step where you complete the loan process and officially refinance or purchase the home. Closings can take place at different locations depending on the state, such as a closing attorney’s office, a title or escrow company, or even your home.

For more information on the mortgage loan process and to get started, contact us today!