This BLOG On Steps In Mortgage Process And Closing Home Loan On Time Was UPDATED And PUBLISHED On August 8th, 2019
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.
- The first steps in mortgage process is the pre-approval stage
- The pre-approval stage is by far the most important process of the whole overall mortgage loan application and mortgage loan approval process
- The main reason why mortgage loans get denied at the last minute or there is so much stress in mortgage process is because loan officers did not due his or her due diligence in qualifying borrowers
- Loan officers did not issue a solid pre-approval letter
- Unfortunately, there are loan officers who issue pre-approval letters without thoroughly reviewing the borrower’s tax returns and looking at the unreimbursed expenses the borrower has deducted off their gross income
- Or did not thoroughly review the borrower’s credit report and issued a pre-approval when borrowers were not fully qualified
- 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
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 analyze the borrower’s two years tax returns:
- Lenders go off the adjusted gross income after all expense adjustments in order 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
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
- tax liens
- 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.