Mortgage Loan Process

Mortgage Loan Process

Gustan Cho Associates

Whether you are applying for a home purchase mortgage loan or refinance mortgage loan, the mortgage loan process is similar.  There are a series of stages the mortgage file needs to go through.  Most mortgage loan applications takes 30 days from the time the mortgage loan originator has the signed mortgage application and disclosures from the mortgage loan applicant.   There are going to be documents required from the mortgage loan borrower such as two years tax returns, two years W-2s, two months bank statements, and other items that may apply for the particular mortgage loan applicant such as divorce papers, bankruptcy paperwork, foreclosure paperwork, child support paperwork, etc.  Any delays in getting these documents will cause a delay in the mortgage loan process and could potentially delay the mortgage loan closing.

Pre-Approval In The Mortgage Loan Process

If you are intending in purchasing a home or refinancing your current home, you need to contact a mortgage lender or mortgage lenders to see if you qualify for a mortgage loan.  This is the first step in the mortgage loan process.  Your mortgage loan originator will have you complete a four page mortgage application, commonly called the 1003, and will run your credit.  Your mortgage loan officer will then ask you to provide preliminary documents to verify your income so he or she can qualify your debt to income ratios.  Your credit, income, and debt to income ratios will be the determinant that dictates whether you qualify for a specific mortgage loan progam or whether you even qualify.  Once your mortgage loan originator reviews your mortgage loan application, credit report, and preliminary documents, he or she will run your mortgage application package through Fannie Mae’s Automated Underwriting System.  Within minutes, the Automated Underwriting System will render its decision whether you have an automated approval or not.  If everything goes well, you will get an approve eligible per DU FINDINGS and you should be set to go.  I normally just go off DU FINDINGS since I have no mortgage lender overlays with my investors.  As long as you get an approve eligible per DU FINDINGS and you can provide all the documents verifying what you stated on your mortgage application, your loan will close.  However, there are lenders, especially banks and credit unions, that have stricter lending requirements and have their own set of mortgage lender overlays where they impose higher lending requirements than what is required by the Automated Underwriting System.

Once you get an automated approval per DU FINDINGS, you will be issued a pre-approval letter and can go shop for a home.

Real Estate Purchase Contract

Armed with a pre-approval letter, you should now be able to shop for a home.  Most seller’s agents will not show you a home without a pre-approval letter and some seller’s agents may request that they speak with your mortgage lender directly.  Once you decide on making an offer on the home of your liking, you then submit an earnest money check along with the real estate purchase contract and wait for the seller to accept or come back with a counter offer.  Once both the buyer and seller has agreed on a mutual acceptance, you then submit the real estate contract to your mortgage loan officer.  Your loan officer cannot start the mortgage loan process until he or she has got a signed real estate contract.  Once your loan officer gets the signed real estate contract, the mortgage loan process officially begins.

Mortgage Processing

Once your mortgage loan officer gets the signed purchase contract, your mortgage file will be assigned to a mortgage loan processor.  The mortgage loan processor, besides the mortgage loan underwriter, is the most important person in the mortgage loan process because it is the processor that is the auditor that reviews your file and make sure the mortgage package is complete.  It is the processor to make sure that you have no overdrafts in your past 60 days bank statements, it is the mortgage loan processor that reviews that there are no irregular deposits on your bank statements and if there is, the processor will request a letter of explanation and the sourcing of the irregular deposit.  If the mortgage package information is missing pertinent information or incomplete and gets submitted to underwriting, you can almost guarantee that there will be a delay in closing your mortgage loan.  A mortgage loan processor’s main goal is to get as little conditions back from the underwriter after the underwriter approves the mortgage loan application.  A great mortgage loan processor who submits a complete package can get a conditional approval with very little to no conditions.  An incompetent or rookie mortgage loan processor can get back 30 plus conditions if not more.

The mortgage loan processor will work very closely with the mortgage loan originator and mortgage loan underwriter.  It is the mortgage loan processor’s job to order the appraisal, order title insurance, do verifications of employment, verification of rent, verification of mortgage, verification of deposit, and make sure everyone from the title company, to the buyers and sellers attorneys are kept in the loop.  If the mortgage application is a refinance loan, the mortgage processor orders the payoff.

The mortgage loan processor will also work with the homeowner insurance carrier to make sure that the subject property has proper insurance and get the invoice for the homeowners insurance so it can be paid at closing.

Underwriting In The Mortgage Loan Process

Once the mortgage loan processor has processed your mortgage loan application, it is then gets submitted to the underwriting department of the mortgage lender and your file is assigned to a mortgage loan underwriter.  The mortgage underwriter is the most important person in the mortgage loan processes.  The mortgage underwriter is the person who will determine whether your mortgage application gets approved or denied and issues the clear to close.  The CTC, CLEAR TO CLOSE, is issued by the underwriter and it means that the mortgage lender is ready to fund the mortgage loan.  The mortgage underwriter will review the mortgage loan application, credit report, credit scores, and all the documents that was provided by the mortgage loan processor.  If the mortgage loan underwriter sees that everything is in compliance and the mortgage loan applicant meets all of the mortgage lending guidelines, the underwriter will then issue a conditional approval.

What Is A Conditional Approval?

A conditional approval is a mortgage loan approval issued by the mortgage loan underwriter with a list of conditions that the underwriter is requesting.  Conditions can be items that was overlooked by the mortgage loan processor such as a recent pay check stub or irregular deposit or it can be that the underwriter does not yet have the appraisal back.  Once all of the conditions from the mortgage loan underwriter has been met, then the mortgage loan underwriter will sign off on it and issue a clear to close.

Final Approval And Clear To Close

After all of the conditions have been accumulated by the mortgage loan processor, the processor then submits all the conditions requested by the mortgage loan underwriter for review.  Two things can happen during this stage of the mortgage loan process.  The mortgage underwriter can sign off on the conditions and issue a clear to close or the mortgage underwriter can find additional conditions from the items provided.  If the mortgage underwriter needs additional conditions, then an updated conditional mortgage loan approval is re-issued.  The mortgage loan processor needs to repeat this step until the mortgage underwriter signs off and issues a final approval and a clear to close.  At this time, the HUD is prepared for both the buyers and sellers.

Mortgage Lenders Docs Sent To Title Company

Once you get a final approval and clear to close and the HUD has been approved by the mortgage lender, the mortgage lender prepare mortgage documents and emails it to the title company.   Once the mortgage docs are signed by the home buyer, the wire is sent out to the title company and funds are disbursed.

Related> Mortgage approval process: Ask the Loan Man

Related> Home Buyer’s Guide to Mortgage Approval

Related> 4 Tips to surviving the mortgage approval process

Related> The Loan Approval Process

Related> FHA Mortgage Approval Process

Related> The mortgage pre-approval process

Related> What is the FHA Mortgage Lender Approval Process?

Related> 5 things you need to be pre-approved for a mortgage

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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