How does the loan process work? 

Buying a home or refinancing to save money can make for an exciting time.  Well, at least until you consider the time spent on the mortgage application, documentation, appointments, and everything else related to home financing. We get it. That part may not be as fun, but it doesn't have to be a pain either. The key is to be organized and have a basic understanding of what's expected.

There aren't as many stages in the refinance process as there are in a purchase. To keep things in order, we’ll briefly touch on two critical steps of the mortgage process that are specific to home purchases. 

 

1. Get a Pre-Approval Letter - to read more about why visit our Importance of an Approval Page. 

 

2. Make an offer - You can also make an offer before starting an application or getting a pre-approval. However, it isn't recommended, especially in today's competitive market. 

Now that we have gotten those two vital Purchase points out of the way lets take a look at the remaining steps of the mortgage process.

 

First step: Complete your mortgage application. 

Prepare to share the following information.

• your income and employment history

• tax returns

• marital status and list of dependents

• assets and investments

• debt and liabilities

• legal and financial declarations

• property address 

• social security number (so that your credit can be checked with your permission). 

If you’re refinancing, you’ll also need to includea recent mortgage statement and a copy of your homeowner’s insurance.

The lender will perform an initial verification of your information to decide how much they may be able to lend you and at what interest rate. This will be provided to you via a document called a loan estimate. 

 

Second Step: Review the loan estimate

The loan estimate is a visual representation of what the new loan entails. This document will illustrate the following: 

• loan amount

• interest rate 

• estimated monthly payment

• loan costs (origination fee, discount points, processing costs)

• closing costs and other fees the lender (or its third-party partners) may charge  

Once the loan estimate including the above points look to your satisfaction the rate is locked and your loan is being processed, where our skilled processors will collect any additional documentation needed, order an appraisal and get your file ready to be moved to underwriting. It is crucial to provide requested documents as quickly as possible. 

 

Third Step: Underwriting

Next up after processing is underwriting. This is where the lender will check your eligibility, confirm the information you've provided, and determine if you are approved or denied. It is an incredibly thorough stage, and it may include you falling into conditional approval, where you’ll need to send in more documentation. 

Your loan status will have to go through these stages with the lender:

• Conditional Approval- approved with conditions 

  • This step of the loan process typically takes the longest, it is crucial that you as the borrower are providing all requested documents in a timely manner. We understand that these requests seem redundant and may be frustrating however it is important to cooperate with your processor to avoid any delays. 

• Clear to Close- Once you satisfy all underwriting conditions, you’ll receive a clear to close. This is when the lender is ready to prepare final documentation and fund your loan. The title company will draft your closing disclosure and schedule your closing — which, by law, can be no sooner than three days after issuing the disclosure.

 

Fourth Step: Closing

Closing processes vary slightly depending on the type of transaction, as well as local, state and municipal laws.

The type of transaction—purchase or refinance—determines who can provide you with accurate final numbers.

• Purchase: You can receive estimated figures from your Mortgage Professional, but they'll need to speak with your local title company or real estate attorney for a final amount.

• Refinance: In most states, you won't be required to use an attorney to close. In that case, you should speak with your Mortgage Professional for the bottom-line.

What to bring to the closing:

• Photo identification

• Personal check or bank check from an approved account to cover the closing costs and down payment (unless the money was wired). NOTE: Your mortgage team will advise the best way to transfer funds for your closing.

Whether purchasing or refinancing, prepare to sign a lot of documents!

• Purchase: While the process varies by state, typically a professional explains every document and notes where to sign. The lender’s wire may need to clear before you're handed the house keys and provided with copies of all the documents.

• Refinance: Depending on local laws, an agent from the title company will explain each document to be signed. If refinancing a primary residence, the loan will fund once the 3-day right of rescission has expired (on the fourth day). Once the rescission period has expired, the loan can no longer be cancelled. If refinancing an investment property or second home, the loan will fund on the same day.

 

Fifth Step: Funding

The final step on the loan process is now complete: Your loan has been funded!

At this time, all documentation is complete and the funds for the loan have been disbursed to the seller (purchase) or to the payoff of the prior loan (refinance).

You should receive your first payment statement at the closing. This should be used to make the first and possibly second loan payment.

• If you did not receive the statement or cannot find it, you can reach out to your Mortgage Professional for a copy

 

Please be aware that documents can be requested after closing as well, please continue to be vigilant with checking for any requests!