THE LOAN PROCESS IN BUYING A HOME



Prequalification (Also know as PreQual)

Prequalification occurs before the loan process actually begins. The lender gathers information about your income and debts, and makes a financial determination about how much house you may be able to afford, although this is not a guarantee of a loan or underwriting.


It's a good idea to know how expensive a home you can afford before you start shopping for one! Many Sellers will request a PreQual letter signifying what you can qualify for before you make an offer.  If you are refinancing the loan on your existing home, then the prequalification process should help you decide whether refinancing is a good idea for you.
 

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Application(Also known as the 1003 or Loan App)

The application is the beginning of the loan process and either occurs after you have found a property you want to buy or have determined that you wish to refinance the loan on your existing home. You complete a mortgage application for a particular loan program and, supply all of the required documentation for processing. Various fees and down payment options are discussed at this time. The loan officer will deliver a Good Faith Estimate (GFE) and a Truth-In-Lending Disclosure (TIL) within three days that itemize the rates and estimated costs for obtaining the loan.  Documentation includes but is not limited to: Paystubs for 6 weeks, 2 Months of Current Bank Statements, Tax Returns for last 2 years, Home Insurance declarations, and other as needed (Possibly Child Supports documents, Alimony Documents).  Also needed will be the Purchase Contract.

 

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Processing of your Estimated Loan

The lender will typically submit the application package to an automated underwriting system that will provide the lender with the necessary documentation needed for loan approval. In some cases, the lender may also manually underwrite an application package.


The lender's processor reviews the credit reports and documentation to verify your employment, debts, and payment histories. If there are unacceptable late payments, collections, judgments, etc., the processor requests a written explanation from you. The processor also reviews the appraisal and survey and checks for property issues that may affect final loan approval. The processor's job is to put together an entire application package for the lender's underwriter.  The Processor and Loan Officer are in daily contact with the Underwriter answering any questions or supplying any additional documents.
 

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Underwriting

The lender's underwriter is responsible for determining whether the application package prepared by the processor meets all the lender's criteria. If more information is needed, the loan is put into "suspense" and you will be contacted to supply more documentation.  It really helps if you are responsive and get the information back as soon as possible as it will go thru underwriting easier.


If the underwriter approves the loan, the lender issues a conditional commitment to lend, orders title insurance, works with you to clear all conditions to its commitment to lend, and then schedules a closing time. Conditions to the lender's commitment may include issues with credit, income, or the property that may arise during the processing and underwriting process.  Just a Note:  Do Not Go Purchase anything extravagant during this time as they will pull credit one more time and if anything has changed, late payments, or more trade lines it could change.
 

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Closing

The closing will occur after all conditions are cleared and the lender issues a full loan approval. At the closing, the lender "funds" the loan with a cashier's check, draft or wire to the closing agent, who disburses funds, in exchange for the title transfer to the property. This is the point at which you finish the loan process and actually refinance or buy the house, subject to the lender's loan. Closings occur at different places in different states. For instance, some states require that the closing take place at a closing attorney's office, while others use a title or escrow company. You may also be able to close at your home.  You will also have to come to the close with whatever money in a cashiers checks was relayed to you for closing costs.


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