Steps In Mortgage Process And Closing Home Loan On Time

This BLOG On Steps In Mortgage Process And Closing Home Loan On Time Was UPDATED And PUBLISHED On November 2nd, 2020 

Steps In Mortgage Process Explained:

Home Buyers looking to purchase a new home or homeowners looking to refinance their current home loans need to go through steps in mortgage process.

Loan officers should get a second opinion from a senior associate and/or a mortgage underwriter if they are not sure of a particular mortgage guideline prior to issuing a pre-approval letter.

Pre-Approval Process Is The Most Important Stage Of The Mortgage Process

Loan officers need to thoroughly review the borrowers mortgage loan application (1003), credit report, W2s and tax returns, and other important documents:

What are the Steps In Mortgage Process

  • Thoroughly review the unreimbursed expenses of the borrower and check the actual adjusted gross income that can be used as qualified income
  • The number one reason for a last minute mortgage loan denial and/or stress during the mortgage process is due to the loan officer not properly qualifying the borrower prior to issuing a pre-approval letter
  • Loan officers who did not thoroughly review the borrower’s credit report and issued a pre-approval when borrowers were not fully qualified will no doubt are asking for trouble

Just taking the borrower’s word on how much they make and just checking if the borrower meets the minimum credit score requirements is not enough data to issue a solid pre-approval.

Issuing Pre-Approval With Outstanding Credit Disputes Will Halt And Delay The Mortgage Process

Credit disputes are not allowed during the mortgage process:

  • A pre-approval letter issued by a loan officer on a borrower with outstanding credit disputes on non-medical collections and/or derogatory credit items is null and void
  • The mortgage process will come to a complete halt if there are outstanding credit disputes until the disputes are removed
  • The reason credit disputes are not allowed is because the credit bureaus will automatically discount the negative credit tradelines that are being disputed from the credit scoring model
  • Therefore, when a consumer disputes a derogatory credit tradeline, the credit scoring formula of the credit bureaus will not pick up the negative factor of the negative credit tradelines so the consumer credit scores increases
  • However, when a consumer removes the credit disputes, then the credit scoring formula will factor the negative factor back in the credit scoring formula and the consumer credit scores will drop
  • The drop can be significant because when the credit scoring formula factors the negative credit tradelines back into the scoring formula, it will get factored in as a brand new negative credit item
  • This is why credit scores with outstanding credit disputes are null and void until the credit disputes are removed
  • However, there are credit disputes that are exempt from retraction
  • Medical credit disputes are exempt from retraction
  • Non-medical credit disputes if the total outstanding balance of all creditors equals less than $1,000, the credit disputes do not have to be removed
  • Credit disputes on non-medical credit tradelines with zero balance are exempt from retraction
  • Credit disputes on non-medical credit tradelines that is older than 24 months old do not have to be removed

In this article, we will cover and discuss Steps In Mortgage Process And Closing Home Loan On Time.

Steps In Mortgage Process Starting With Loan Application

Once a person decided on purchasing a home, in order to go shopping for houses, they need a pre-approval letter from a mortgage loan originator.

  • The borrower needs to complete a four-page mortgage loan application
  • This 4-page mortgage loan application is called 1003

Borrowers need to submit several documents such as the following:

  • two years tax returns
  • two years W-2s
  • 30 days paycheck stubs
  • other documents that may apply to them

Income Qualification And Determining Qualified Income

The loan originator will carefully reviews and analyze the borrower’s income by thoroughly examining the borrower’s income docs such as W2s, 1099 if applicable, two years tax returns. If the borrower has overtime and/or bonus income or there is some irregularities in income, the loan officer should get a verification of employment initiated and completed prior to issuing a pre-approval letter:

What is income qualification and determining eligible income

  • Lenders go off the adjusted gross income
  • The adjusted gross income is the income after all expense adjustments
  • Adjusted gross income is used to calculate the borrower’s debt to income ratios and qualified income

The loan officer will also need to carefully review the borrower’s credit scores and credit payment history and review the whole credit report.

Reviewing The Borrowers Credit Reports For Accuracy And Missing Information

The special attention that a loan officer needs to check are derogatory information reported on the credit report such as the following:

  • credit disputes
  • outstanding collection accounts
  • judgments
  • tax liens
  • bankruptcies
  • foreclosures, charge offs, credit disputes, and any public records

Once the loan officer feels confident that the borrower meets all mortgage lending guidelines, a solid pre-approval letter will be issued.

Steps In Mortgage Process During Processing And Underwriting

Once a home buyer gets a solid pre-approval letter, that pre-approval letter is the ticket to go and shop for a home.

  • Once the home buyer chooses a home, he or she will enter into a real estate purchase contract
  • Once the loan officer gets the executed real estate purchase contract, the mortgage loan gets registered and the disclosures get sent out, including the Loan Estimate
  • The Old Good Faith Estimate was replaced by the New Loan Estimate
  • Once the mortgage borrower receives the mortgage loan disclosures and signs the wet docs, the file will get assigned to a mortgage loan processor
  • The mortgage processor’s job is to get all of the proper documents together and get the file ready for the mortgage loan underwriter
  • The mortgage underwriter is the person who reviews the loan package and determines whether borrowers gets a loan approval or denial

If the mortgage underwriter feels comfortable with the loan package and feels the borrower meets all lending guidelines and all of the lender overlays, he or she will then issue a conditional mortgage loan approval.

Steps In Mortgage Process Leading To Timely Clear To Close

Once borrowers get a conditional mortgage loan approval, the next step in the mortgage process is to get all the conditions to get a clear to close . A clear to close is when the mortgage underwriter has signed off on all conditions and in many cases, an underwriting manager has reviewed the file and gave the mortgage underwriter his or her blessings. Clear To Close means the lender is ready to send docs out to the title company and send the funds via wire to fund the mortgage loan.

What are the steps in the mortgage process leading to a timely release to closure

To qualify for a home mortgage with a national mortgage company with no lender overlays on government and conventional loans, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

 

2 Comments
  1. Tammy Trainor

    PRE-LICENSING EDUCATION AND EXPERIENCE
    ACADEMIC INSTRUCTION REQUIREMENTS
    A person applying for an initial license must provide to the commissioner evidence that during the twenty-four (24) month period immediately preceding the application that the
    person completed at least twenty (20) hours of academic instruction approved by the Nationwide Mortgage Licensing System and Registry. The education must include the following:
    • Three (3) hours of federal law and regulations concerning residential mortgage lending.
    • Three (3) hours of ethics, including instruction on fraud, consumer protection, and fair lending practices.
    • Two (2) hours of training concerning lending standards for nontraditional residential mortgage loan products.
    • Twelve (12) hours of undefined electives.
    • Two (2) hours of Indiana state law and rules concerning residential mortgage lending.
    (IC 23-2.5-6-1)
    TESTING
    The commissioner requires an applicant for licensure as a principal manager; or mortgage loan originator to pass the NMLS National MLO Exam. The test measures the applicant’s knowledge and comprehension in appropriate subject areas, including the following:
    • Ethics.
    • Federal laws and regulations concerning the origination of residential mortgage loans.
    • State laws and rules concerning the origination of residential mortgage loans. Applicants must pass the exam with a score of seventy-five percent (75%) or greater. An individual who does not pass the exam on the first attempt may retake the exam two (2) additional times, however, they must wait 30 days between attempts. If an individual fails 3 consecutive examinations, the individual must wait 6 months to retake the exam.
    (IC 23-2.5-6-5) Additionally, if an individual does not obtain a license within 2 years after the date on which the individual passes the written exam for the license, the commissioner may not issue the license to the individual unless the individual passes the written exam again.
    (IC 23-2.5-6-7)
    ISSUANCE OF LICENSE/DATE OF EXPIRATION
    The Commissioner will issue a license and license number to an applicant for a loan broker license, a mortgage loan originator license, or a principal manager license if the applicant meets the applicable licensure requirements. Licenses issued by the Commissioner expire on December 31 of the year in which they
    are issued. Finally, whenever an initial or a renewal application for a license is denied or withdrawn, the Commissioner will retain the initial or renewal application fee paid.

  2. Mike Santiago

    Interested in obtaining a loan for first-time buyer. I am 2 years in a chapter 13 bankruptcy

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