The very first steps in the loan process will be to complete a loan application and to have a consultation call with your mortgage loan broker.
Step 1 – Submit your Loan Application
- You will complete a loan application which will collect the basic information about you that we will need to start the pre-approval process
- I will run your credit to see your credit score, account pay history, and current debts. To start with, I do a soft-credit check so it will not show up on your credit report. At some point in the process, we will do a hard credit inquiry and you will be alerted to when that step is going to happen.
- Be sure to have your documents lined up and ready to go. There are a few items we need on every loan. For example, we need to validate work history, earnings history, your current assets, and your identity. These might be include: Most recent paystubs, previous 2 years of W2s (or tax returns if you are self employed or show rental income), bank statements, and a copy of a valid government issued photo ID.
Step 2 – Loan Pre-approval
- Once we have verify your credit, employment, and assets, your loan will be run through a desktop underwriting system which will provide a preliminary decision if you would be eligible to get a loan or not. This is a first step and is not a full underwrite of a loan. That step will happen later in the process.
- Once there is a preliminary desktop underwrite approval, a PREAPPROVAL letter can be issued. This letter is will help show a property Seller you are serious about purchasing and that you have gone through the steps to get qualified for a mortgage.
Step 3 – Formal Loan Application
- The formal Loan Application will be completed once you have identified and put a property under contract. The loan application requires six pieces of information: Your name, your income, your social security number (so a credit check can be run), the property address of the home you are planning to purchase or refinance, an estimate of the home’s value, a loan amount.
- Once the six pieces of information are provided, you will receive your initial loan disclosures, Intent to Proceed, and a Loan Estimate within 3 business days. This is a mandatory step. It’ll be important that once the loan disclosures are issued that you acknowledge receipt and sign them. The disclosures do not bind the borrower in any way, but there are certain fees that typically cannot increase once the loan
- When the Intent to Proceed is signed, this will trigger to order an appraisal on the property and to move the loan to move to the next steps, processing and underwriting
Step 4 – Processing, Appraisal, & Underwriting
- The next step in the loan process is having the loan reviewed by the processor. The processor will complete a variety of administrative tasks and ensure the loan is ready to be reviewed by an underwriter.
- During the processing step, you will be asked to provide a home owner insurance quote and binder. Often times, the insurance company will want information from your loan originator or the processor to complete this step. Please be sure to put us in touch with your insurance agent or provider so this information can be provided in a timely manner.
- The processor will also order an appraisal to be completed on the property
- The appraisal (if required) will be ordered early in the loan process. This is an expense the borrower will pay prior to closing and typically can range anywhere from $500 to $900 depending on loan type and location. We strive to hold an appraiser from viewing a property until all inspections are complete and any necessary repairs are agreed too.
- After the processor completes the required tasks, the loan will submitted to underwriting. The underwriter will take an in-depth look at the entire loan package will either suspend the file, deny the file, or issue a conditional approval.
- Once the conditional approval is issued, the processor and the loan originator will review the conditions and request and updated documents the underwriting is requesting. Please know, we understand that sometimes these conditions can be frustrating. We do not ask for things that we do not need. We only ask for items the underwriter wants so we can approve your loan.
Step 5 – Final Underwriting / Clear to Close / Closing
- Once all of the conditional approval items are collected, the loan will be re-submitted for final underwriting. Once the underwriter has reviewed and approved these documents, they will issue a final approval and a CLEAR TO CLOSE. Clear to close are everyone’s favorite words in a mortgage transaction.
- Once the property is clear to close, the loan will get turned over to the closing team at the bank and the process to complete and fund the loan will begin.
- Part of the closing process will include issuing a Closing Disclosure. The Closing Disclosure is extremely important as it is what starts the clock ticking so you can sign your final loan documents and the loan can be funded. Regulations require you have no less than 3 business to review the Closing Disclosure. Sundays and Federal Holidays don’t count toward the 3 business days.
- After you the sign preliminary closing disclosure the lender closing department and the title company will work together to balance the closing disclosure so you will know exactly how much money you need to wire to the title company.
- Typically, a day or two before your closing, your loan package will be sent to the title company or settlement provider. They will review, print, and have this available to you on your closing day. There will be a lot of documents to sign. For a purchase transaction in most states, as soon as all the closing documents are signed, your loan will immediately be funded and proceeds disbursed to all parties.
- CONGRATULATIONS!! If you get through these steps, you are now a homeowner. It’s time to celebrate!