Pre-Qualification
Pre-qualification occurs before a loan process actually starts, and is usually
the first step after initial contact is made. The lender gathers information
about the income and debts of the borrower and makes a financial determination
about how much of a home the borrower might be able to afford. Different loan
programs might lead to different values, depending on whether you are qualified
for them, so be sure to get a pre-qualification for each type of program you
are suited for.
Application
The application is the beginning of the loan process and usually occurs between
days one and five of the loan. The buyer, now referred to as a "borrower",
completes a mortgage application with the loan officer and provides all of the
required documentation for processing. Various fees and down payments are discussed
at this time and the borrower will receive a Good Faith Estimate (GFE) and a
Truth-In-Lending statement (TIL) within three days that itemizes the rates and
associated costs for obtaining the loan.
Processing
Processing occurs between days 5 and 20 of the loan. The "processor" reviews
the credit reports and verifies the borrower's debts and payment histories. If
there are unacceptable late payments, including collections for judgment, a written
explanation is required from the borrower. The processor also reviews the appraisal
and survey and checks for property issues that might require further evaluation.
The processor's job is to construct an entire package that can be underwritten
by the lender.
Underwriting
Lender underwriting occurs between days 21 and 30 or sooner. The underwriter
is responsible for determining whether the combined package passed over by the
processor is deemed as an acceptable loan. If more information is required, the
loan is placed into "suspense" and the borrower is contacted to provide
more documentation.
Mortgage Insurance
Mortgage insurance underwriting occurs when the borrower has less than 20% of
the loan amount to place towards a down payment. The loan is submitted to a private
mortgage guaranty insurer, who provides extra insurance to the lender in case
of default. If additional information is required, the loan goes into suspense.
Otherwise, it is usually returned to the mortgage company within 48 hours.
Pre-Closing
Pre-Closing occurs between days 25 and 30. During this time the title insurance
is ordered, all approval contingencies, if any, are met, and a closing time is
scheduled for the loan.
Closing
Closing usually occurs between days 25 and 45 of the loan (depending upon the
designated length of your escrow). At the closing, the lender "funds" the
loan with a cashier's check, draft or wire to the selling party in exchange for
the title to the property. This is the point at which the borrower finishes the
loan process and actually buys the house.
