In this first step, a lender determines a borrower’s ability to qualify for a home loan. The lender gathers information about the borrower’s income, debts, and credit history. Based on the criteria of the collected information, the lender attempts to match the borrower with a loan program that is suitable to the needs of the borrower. If a match can be made, the borrower is pre-qualified for a home.
This step usually takes place shortly after the borrower’s offer on a home is accepted. The borrower completes the mortgage application and provides all required documentation (bank statements, pay stubs, W2’s, etc). The lender issues documents that disclose the loan amount, fees, and the interest rate. The borrower signs the initial loan documents which allow the lender to begin processing the loan. The application is then submitted to loan processing.
The loan processor orders an appraisal, homeowners insurance, and a preliminary title report. The information on the application, such as bank deposits and employment, are then verified. Once all the verifications have been made and the above orders have been received, the entire mortgage package is then sent to underwriting for final review.
The underwriter reviews the loan package to make sure it conforms to all the guidelines required for the loan. They also review the appraisal and title report and may do additional validation of employment and credit history. The underwriter may ask for the borrower to provide additional documentation to support the information in the file. When the underwriter determines that the application is complete and precise, the loan is approved.
Once the loan is approved, a loan closing is scheduled for the borrower to sign the final loan documents. These documents contain the terms of the loan and the official agreement between the borrower and lender. The borrower provides the down payment at this time in the form of a cashiers check. The closing is facilitated by a licensed title officer.
Once the closing has been completed and all documents properly executed, the lender orders the funds for the loan. The money is wired to the seller and the transaction is recorded with the county. The buyer now officially owns the home and is given keys to the property!