The Loan Process
Understanding the loan process from pre-qualification to close.
Congratulations, you have decided to purchase a home. The first step in this sometimes complicated process is to get pre-approved or at least pre-qualified. This can be achieved by contacting your bank or any mortgage lender. Please note not all mortgage lenders are ideal to work with. Ask your real estate agent for recommendations. Real estate agents usually have a good relationship with several lenders and they know these preferred lenders can get the job done without over charging you.
A pre-qualification is a very basic mathematical calculation to determine how much house you can afford. This is done by the lender asking several questions regarding your income, debt and assets. They initially do not check your credit and the process can be done over the phone or on the internet with no documentation. They will supply you with a pre-qualified letter which is used by your Realtor when submitting offers. You can not submit offers without a pre-approval or pre-qualification letter.
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A pre-approval is more appealing to sellers and their agents. When getting pre-approved the lender will ask more extensive financial questions, require documentation and run a credit check. They may or may not require an upfront application fee. With a pre-approval, you will receive a conditional commitment in writing for an exact loan amount, allowing you to look for a home at or below that price level. Obviously, this puts you at an advantage when dealing with a potential seller, as he or she will know you’re one step closer to obtaining an actual mortgage.
Once you have an accepted offer you will have a limited time to complete the loan application process. Your Realtor will provide your lender with a copy of the residential purchase agreement and any supporting documents. All of your financial documentation must be submitted to the lender for verification and final approval during this time. Your lender should also provide you with a good faith estimate of all costs associated with the home purchase.
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Once your loan package is complete it will be handed off to the loan processor. The loan processor will review the file and order the appraisal. (which is paid upfront, typically by the buyer) They may request additional information from you and/or your escrow company.
Once the appraisal report is back the processor is required to order a “Fraud Guard” report. This report often runs 25 or more pages and reviews everything and everyone involved to ensure that no party engaged in the sale has been involved in fraudulent activity in the past. This includes:
- The borrower and their background,
- Appraiser
- Attorney
- Property and real estate professionals involved in the transaction
The processor will also review the appraisal and all documentation prior to submitting for full underwriting approval.
The package is now forwarded to the underwriter for final approval. The underwriter is reviewing all the details and documentation for compliance to all regulations and guidelines as established by Fannie/Freddie/HUD and state and national regulators. The underwriter will obtain final employment verification and may run a second credit check.
Prior to your closing the lender will send loan docs to your escrow company. Once everything is executed they will approve the funds to be released via a wire.
This is a very basic summary of the loan process. We would be happy to answer any questions you may have and refer you to a mortgage professional to start the process. We look forward to assisting you throughout the entire home buying process. In conclusion we are confident that with our team of professionals we will successfully get you to the finish line.
Best Regards,
The Sales Team
702-845-5348
