This Article Is About The Mortgage Loan Application Process For Borrowers
The mortgage loan application process is a series of processes that starts from the time you sign the mortgage application and loan disclosures.
- The whole mortgage loan process takes anywhere between 30 days at best to no more than 60 days
- The average mortgage loan application process from the original pre-approval stage to the clear to close takes normally 45 days
Pre- Approval Mortgage Loan Application Process
The mortgage loan pre-approval mortgage loan application process starts before the actual mortgage loan process begins.
- The mortgage loan officer will gather information with regards to your income, assets, and liabilities, and will run credit and run your file through the automated underwriting system to determine your mortgage loan pre-approval
- Once the loan officers feel comfortable that he or she can close your mortgage loan and you are fully qualified and meet all the mandatory federal mortgage guidelines, the loan officer will issue a pre-approval
How Much Can You Afford Versus Qualify
Prior to the start of the mortgage loan application and approval process, the loan officer will discuss your monthly housing payments which consist of principal, interest, taxes, and insurance:
- This is done to make sure that you are able to afford it comfortably
- Just because you qualify for a mortgage loan does not mean that you can comfortably afford your monthly housing payments
- Lenders do not take into account your extra expenses such as child care, school tuition, food costs, or other high ticket monthly expenses
It is always a good idea for you to go over your monthly living expenses and go over it with your loan officer before shopping for a home.
Application Mortgage Loan Application Process
The application process is the start of the mortgage loan process:
- It starts when you entered into a real estate purchase contract if you are a home buyer
- Or when you have decided to refinance your current home loan if you are a homeowner trying to lower your mortgage rate and reduce the monthly mortgage payments of your existing home
- You start by completing and signing the mortgage application and disclosures on the particular mortgage loan program you choose
- Loan programs are FHA, VA, USDA, Non-QM Loans, Jumbo Mortgages, or conventional loans
- You then are required to provide documents such as tax returns, W-2s, etc.
- Here are the documents required that needs to be provided.
- The mortgage loan originator is required to provide the Loan Estimate within three days of the borrower signing the loan application
The loan officer needs to provide the LE (The Loan Estimate) within three days of the borrower signing the mortgage loan application. The Loan Estimate lists the itemization and estimated fees and costs for obtaining the mortgage loan.
Processing In The Mortgage Loan Application Process
Once you have signed the mortgage loan application and submitted all necessary loan documents, the file then gets submitted to the processing department of the mortgage company:
- A mortgage processor gets assigned to your mortgage file
- The mortgage processor will review the credit scores and credit report
- The loan officer will review the documents to confirm and verify employment, wages, debts, liabilities, assets, and payment history of the borrower
- The mortgage processor will also review the 60 days of bank statements to make sure there are no overdrafts, no irregular deposits and/or large deposits, late payments, judgments, or collections
- The processor will notify the borrower if there are any potential red flags that the mortgage underwriter will catch
- The mortgage processor’s job is to make sure that the file is as complete as possible and make the file easy for the mortgage underwriter to navigate
- If there are any unclear items, the mortgage processor will require a letter of explanation from the borrower so there is clarification
The mortgage processor will also order the appraisal, order title or coordinate ordering title with the sellers’ attorney and/or title company, order survey.
Attention To Details Prevents Delays In The Mortgage Process
Our processors review 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, title 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 investor’s underwriter.
Underwriting In The Mortgage Loan Application Process
Mortgage underwriters are the people that determine whether or not to approve the mortgage loan application and issue the clear to close.
- A clear to close means that the mortgage company is ready to issue closing documentation and wire the funds for the closing
- Once the mortgage loan underwriter approves the loan, the investor will issue a conditional loan approval
- Once the conditions have been met, that is when the mortgage loan underwriter issues a clear to close
- The mortgage processor then schedules the closing with the title officer at the title company
The title officer will check the buyers and sellers schedules and set the closing time and date.
Closing: Final Stage Of The Mortgage Loan Application Process
Closing is the final stage of the mortgage loan process. The closing is when the title changes hands and the funds from the lender gets wired to the title company. Official ownership changes hands at the closing on home purchase transactions. With refinances, the funds get disbursed three days after the closing due to the 3-day rescission period.