This is just a quick reference to the loan process. More steps may be necessary based on the type of loan you are pursuing. For instance, a USDA loan is sent to the USDA for final underwriting approval. Or a Construction loan would have many more steps. But, for the most part, this is what you can expect when it comes to the mortgage loan process.
1. The loan application This is the beginning... where all the information is filled out onto a form called a 1003 (ten-oh-three). After completing your application, your Loan Officer will provide you with all necessary legal disclosures within three days of your application date. You will then be asked to provide a number of items to document what is stated on the 1003. You as the borrower have complete control over how long this process takes. Typically it is very difficult to move on to the next step if your Loan Officer does not have all the necessary paperwork for the file.
2. Processing The Processor will take the file and review it for accuracy and thoroughness. There may be items that your Loan Officer overlooked or are lender specific forms to be signed. The Processor will either reach out to you or have the Loan Officer ask you for anything else that's needed. The Processor will also order the Title to your property, open an Escrow Account for you, order your Appraisal and order your Insurance Binder. Once all the necessary items are obtained, the Processor will submit your file to the lender for underwriting.
3. Underwriting Your entire file will be sent to the lender electronically and securely for underwriting. The lender has a Set Up person that once again reviews the file for completeness according to the specifications of the lender. Anything missing will be requested. Once the file passes set up, it goes in line for the next available Underwriter to approve the loan.
4. Appraisal Typically the appraisal can take several days to weeks depending on the time of year and volume. The appraisal gets ordered right away and is in line while the file is in underwriting. Many things can affect the appraisal. Check out our blogs on Appraisal Gotcha's to learn more.
5. Back to Processing Once the Underwriter has reviewed the file and approved or denied it, the results will be sent to the Processor. The Processor will work with the Loan Officer to meet all the conditions on the approval. The Underwriter may ask for more clarification or explanation on the documentation you already provided or they may need more documentation to complete the file.
Your Loan Officer will contact you to go over the Conditional Approval and help you make sure those items are able to be sent to the Underwriter as soon as possible. It's very important you provide these things for the Underwriter quickly. All of this will affect the ability to close your loan on time.
Once all of the items requested by the Underwriter are collected and given to the Processor, they will again submit the file for a Final Approval. Typically the appraisal has been completed and will also be sent for review by the Underwriter.
6. Underwriting Again The Underwriter will review the conditional approval and the items sent in to meet those conditions. If everything is satisfactory, the Underwriter will sign off on the loan and issue a Final Approval giving the Clear to Close.
7. Closing Disclosure This form will be put together by the lender explaining the final loan amount, terms and fees for your loan. You will have three days to review this document. It is very important that you acknowledge receipt of it right away. That acknowledgement starts the three day clock the lenders have to follow before you can sign your closing documents.
8. Closing A Closer will be assigned to your loan. They generate the loan documents from the lender that you will sign. They review all the terms for accuracy and make sure everything is complete before sending it over to the escrow office. The Escrow Officer will call you to make an appointment for you to come in and sign all the paperwork for your mortgage. They are there to witness you signing, not give you any legal advice. If you have questions about the terms, call your Loan Officer. They should be able to answer those questions for you.
9. Funding The Escrow Officer will send your complete signed package back to the lender for funding. A Funder will be assigned and will again review everything for completeness and compliance. If anything is missing, they will notify your Escrow Officer and the Processor to provide it. Once everything is signed off, they order the wire for your funds to go to escrow. Escrow will receive the funds and have your Deed recorded with County Public Records. Escrow and your Loan Officer will let you know that your loan is funded and that your transaction is complete.
What can you do?
As you can see from the outline above, there is a lot involved in closing your mortgage loan, the biggest investment you will ever make! The smoothest transactions happen when you as the borrower make yourself available and quickly respond to any requests from your Loan Officer. Some things may even feel excessive, but if your Loan Officer is asking for it, it's because the Underwriter HAS to have it.
The home loan process can seem overwhelming and hopefully you can see that price is really important, but a smooth team of professionals is critical to your success. Ask lots of questions before choosing who to work with and be very wary of someone who seems to just be telling you what you want to hear. Honesty is critical to this process and should be at the heart of the team you choose to work with.
Happy Home Buying!