Eight steps to a home mortgage
1. Pre-qualification
The lender gathers information about the income and debts of the borrower and makes a financial determination about how much house the borrower may be able to afford. When you know how much you are pre-qualified for you can go home shopping with a Realtor.
2. Application
A formal application starts the loan process and usually occurs between days one and five of the loan. The borrower completes a mortgage application with the loan officer and supplies all of the required documentation for processing. Various fees and down payments are discussed at this time and the borrower will receive a Loan Estimate, which itemizes the rates and associated costs for obtaining the loan. Loan down payments can range from 3%-20% minimum down.
3. Opening the File
This occurs between days 3 and 10 or once you have had your offer accepted on a home. At this time the lender orders a property appraisal, title insurance, property survey, and credit reports, mails out requests for verifications, such as employment, bank deposits, rent, and any other documents needed for processing the loan. All information supplied by the borrower is reviewed at this time and a list of items not yet received is compiled.
4. Processing
Processing occurs between days 5 and 25 of the loan. The processor reviews the credit reports and verifies the borrower’s debts and payment histories.If there are unacceptable late payments, collections for judgment, etc., a written explanation or other remedy will be required from the borrower. The processor also reviews the appraisal, survey, and checks for property issues that may require further discernment. The processor’s job is to put together an entire package that may be underwritten by the lender.
5. Underwriting
Lender underwriting occurs between days 15 and 25. The underwriter is responsible for determining whether the combined package received by the processor is deemed as an acceptable loan. If more information is needed, the loan is “suspended” and the borrower is contacted to supply more documentation.
6. Pre-Closing
Pre-Closing occurs between days 20 and 30. The file has come out of underwriting and all conditions are being cleared. Once this has been achieved, a closing time is scheduled.
7. Closing
Closing usually occurs between days 15 and 45 of the loan depending on the loan you have. At the closing, the lender funds the loan with a cashier’s check, draft, or wire to the selling party in exchange for title to the property. This is the point at which the borrower finishes the loan process and actually takes possession of the house.
8. Move in!
Congratulations on your new home! Do not forget to file your tax exemptions and ask your lender where and how your first payment will need to be sent.