The Loan Process (Start to Finish)

The Loan Process begins with an initial consultation between the borrower and the broker. During the first conversation, it is extremely important for the borrower to discuss what they hope to accomplish with their new investment in real estate. It is then the duty of the broker to best determine how to accomplish that goal, with the current qualifications of the borrower. Unfortunately, borrowers often end up in the wrong mortgage product because their lack of communicating what they truly intend to do. Borrower's also must remember to be upfront and truthful with their broker from the start. Remember, the broker acts as the borrower's representative and structures the loan for presentation to underwriting. They will help their borrower around any weaknesses they may not want to disclose to underwriting. From the conversation the broker will take a written loan application....

After taking a complete application, one of the very first things that the loan agent must do is access the applicant's credit report. A competent mortgage professional will examine not only the credit scores but do a line by line analysis of the report and highlight any information that could be considered derogatory. Once the report has been examined the Loan Officer will review it with the applicant and get their response to any derogatory information.

An appraisal will be ordered as to support the value of the property. The loan is based off the overall value of the property and is crucial to get the appraisal done right away. Typical time for appraisal vary from area to area depending on demand and market conditions.

From the time the application was taken the broker has three days to send you RESPA compliance forms.

After deciding on the loan program, the applicant must supply the necessary income and assets documents (W2's, paystubs, bank statements, etc.) as required by the chosen loan program. Because these documents are essential to the underwriting process, the application package cannot be submitted without them. Therefore, it is important that the applicant present them without delay.

After all of the documentation is collected we will send your loan package to underwriting for evaluation. Underwriting will then decide if the proper information has been sent or if they want to see additional information to make a final determination for the mortgage.

The underwriter may ask for additional information on a case by case basis, considered a stipulation of funding.

Your loan officer or mortgage broker has asked you a number of questions at application. Your answers,
credit report information, and the loan program you’ve applied for will help determine if you qualify
for an instant mortgage approval using an automated underwriting system. These systems are often referred to as DU and LP. They stand for Desktop Underwriting and Loan Prospector.

Documentation requirements vary, depending on the loan program, credit profile
and various other requirements of the lending institution. In some cases only minimal documentation
is required. In other cases more detailed documentation may be required.

An appraisal will be ordered at application to determine the fair market value of the property you are
purchasing.

You can either lock in your interest rate (rate lock) or float your interest rate. It is important to discuss
these options with your loan officer or mortgage broker.

At application or shortly after, you will receive a Good Faith Estimate and a Truth-in-Lending Statement,
which will show your annual percentage rate (APR). These documents are required by federal law and
disclose the credit terms of your loan and approximate closing costs.

After submitting your application to an automated underwriting system such as DU or LP, you will be given a conditional approval letter. This conditional approval will outline all the required documents needed to accompany your application.

Your application along with the required documents will be submitted to an underwriter. An underwriter is a trained credit-risk analyst who will do everything possible to help you receive loan approval. It is the responsibility of the underwriter to insure all documents supplied with the application meet the lender’s requirements.

Soon after your application is approved you will receive a commitment letter that explains the terms of your loan, including any loan conditions that need to be met prior to closing. Read your commitment letter carefully, and be sure to follow the instructions to ensure a timely closing.

In the case that your application is not approved, your loan officer or mortgage broker can help you
determine what actions need to be taken to obtain financing.

Its important to gather all of the remaining conditions quickly as the lender may still need a few days to review them. After all conditions are met your loan will be "cleared to close". Generally at this time the settlement agent or title attorney will take over and prepare for closing.

» DISCLAIMER: The information contained in this article on 'The Loan Process (Start to Finish)' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.