The Lending Process
The Lending process starts with interest from the borrower in either buying a home or refinancing. When thinking about buying a home many people start to look for houses first. The first step should always be to consult with a mortgage professional. When talking with a mortgage broker you will need to disclose information about credit, income employment, and housing history. These factors all contribute to the ability to qualify for a loan. The mortgage broker will often get a full approval before issuing you a pre-approval letter. This will need to be provided to any real estate agents involved with the purchase of a home.
In either a refinance or a purchase the remainder of the process is relatively the same. Often as a borrower you will shop for the best rate once you have gotten pre-approved. The best way to do this is to get your credit scores from the first broker so you can provide it to subsequent brokers. This will help limit the number of inquiries on your credit. Make sure you are comparing apples to apples; get the type of loan, estimated payment (just principal and interest), the rate, the estimated closing costs, and the APR. Also be aware that interest rates vary much like any other financial market, rates can go up or down from day to day, so try and make all your calls on one day.
Once you have chosen a broker you will be required to sign an application package. This will consist of the application, disclosures, good faith estimate and several other documents. At this point the broker will also require copies of documentation: pay stubs, W-2s or 1099s, bank statements, current mortgage statements, home owner’s insurance statements, sales contract, etc. The type of documentation requested will depend on the type of loan and if it is a purchase or a refinance. In the case of a refinance there is not much else for the borrower to do, in a purchase you will need to start to contact an insurance agent and work with your realtor for the home and pest inspections, etc.
Now is when the mortgage broker starts to put your loan together for the lender. The broker orders the title work, and the appraisal, and starts to verify the information and documentation provided. The broker may need to contact your bank, employer, landlord, or other creditors to get written confirmation of the information you provided on the application. Once the title work and appraisal are complete, which may take a week or two, the broker compiles all the information and organizes it into the specific format for submission to the lender that has been chosen for your loan. The lender reviews the submission in a process called underwriting. Once the lender has verified all the information and documentation submitted they may ask for additional documentation or information. If they need anything else they will send the broker a list of conditions or stipulations (stips). If nothing else is needed they will issue a clear to close and the broker will schedule the closing with the title company, borrower and the real estate agents and seller in the case of a purchase.
A Quick Summary of the Loan Process:
-Find the mortgage that best fits your needs.
-Fax, mail, or deliver the paper work that a loan officer has requested.
-Sign and return the loan papers.
-Get the home appraised.
-Loan goes to underwriting and additional documents may be requested.
-The loan is approved and closed.
The length of time that the lending process will take can vary. Factors that go into the amount of time it takes include who the lender is, how busy the lender's underwriting department is at the time your file is submitted, availability of the appraiser and other things. Delays by the borrower in getting needed documents to the broker or lender can also cause the loan process to take longer.
You will also need to provide the name of your insurance agent so that your policy will reflect accurate mortgagee clause information.
The Lending process can be nerve racking to some borrowers. A competent loan officer will keep you informed so you know what stage the lending process is in. Borrowers should be prepared for bumps along the way. These bumps happen most often because everyone involved in the process has their own time schedule including the borrower. A good loan officer will explain this to you and minimizes these bumps in the process.
One of the most important features of being involved in the lending process is not delaying. There are so many moving parts in the process that any one person's delay can cause the time to funding greatly prolonged.
Always be upfront with your loan officer and do not withold information from him. Your loan officer will look out for your best interest, and the best way to do that is by having all the facts up front.
Part of the lending process is locking the interest rate. You can lock rate any time from the initial application to 3 days before closing. Depending on whether it is a purchase or refinance, most banks allow you to lock for 15, 30, 60, 90 days, or even longer. The longer an interest rate is lock for, the higher the interest will be. Therefore, you should always discuss with your loan officer about when and for how long should you lock your interest rate.
The documentation requested of you, during the loan process, from your mortgage professional will vary depending on the loan you are attempting to get. For example if you are doing a stated income/stated asset loan, then ou will not be required to provide tax returns, bank statements, or other things of this nature.
It is a good idea to go over with your mortgage broker the steps that he/she will have in their personal lending process as the time schedules and procedures may change from lender to lender.
If you have any questions about what point you are at in the process, you can always call your loan officer and ask. They are there to help you, answer all your questions, and put your mind at ease.
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Information listed above is to be used for educational purposes only and is not guaranteed