From Start to Finish: The Complete Loan Process
Getting ready to buy your first home? Maybe you’re thinking the home loan application process is a bit overwhelming? If so, you’re not the first. Getting a mortgage involves multiple parties providing various bits of documentation needed to close your loan. You need to be approved but before the loan can reach the final funding stage, other steps must be taken. Here’s what you can expect to happen once you submit your loan application.
Prior to submitting the application, you should have you spoken to your loan officer regarding what sort of documentation is required from you. In addition to the application, you’ll provide copies of your pay check stubs, W2 forms and tax returns if you’re self-employed. Before you ever even step out to start shopping for a home, you will have previously provided your application and supporting documentation. By providing this documentation all you need at this point is a property address.
When the lender receives your application it submits your loan electronically to an automated underwriting
system. This process provides the lender with a list of items needed to close your loan. These items can be those from you and they’ll also be from third parties. Your loan officer will contact you about what is needed and at the same time the lender will order various third party services. An appraisal and title work will be needed. The settlement agent must be contacted and so on. There’s quite a bit of work going on behind the scenes that you’re not aware of and sometimes applicants can think there’ nothing going on with their loan file when just the opposite is the truth.
When the loan file is completely documented it is then delivered to an underwriter who makes sure the loan package conforms to the guidelines for the loan program submitted for and the items listed on the automated approval have been completed. Once all of these items have been “signed off,” the loan enters the “clear to close” phase. At this stage, loan papers are drawn and delivered to the settlement agent. The settlement will prepare for the closing as instructed by the lender and also prepare the final settlement showing how much will be needed at closing. This statement must be provided to the borrowers at last one day before the settlement date.
At the closing, the borrowers show up and sign and initial at the direction of the settlement agent. They may also notice they’re signing some of the same documents they’re previously signed. This is because some documents need a live signature and not a copy of one. Once the papers have been signed, the agent sends the closing package back to the lender. The lender will compare the returned documents with the instructions the lender provided to the settlement agent. Once that determination has been made, the mortgage company provides the settlement agent with a “funding number” which unlocks the funds for the mortgage being held in escrow. Once the funding number is issued and funds released, the loan is officially closed.