Pre-Qual
Pre-qualification is the beginning of the process. In pre-qualification, the lender gets information on the income and debts of the borrower and makes a determination about what the borrower might afford.
Application
This is just the beginning of the loan process. The “borrower”, completes an application with the loan officer and supplies the documents required for processing. Fees should be disclosed now and the borrower will receive a Good Faith Estimate (GFE) and a Truth-In-Lending statement (TIL) within three days.
Processing
Processing is a review of the credit reports and verification of debts and payment histories. This could take the form of verifications of deposit, verification of employment, verification of rent or mortgage. It may require pay check stubs and bank statements. If there are late payments, collections for judgment, or any other ‘hits’ on the credit of the borrower, a written explanation will be required. The processor also reviews the appraisal and title policy. The processor’s job is to pull all the pieces together in an orderly package to be underwritten by the lender.
Underwriting
Lender underwriting determines whether or not the combined package is an acceptable loan. If more information is needed, and it almost always is, the underwriter requests information or documentation specific to the area they are questioning.
Mortgage insurance
Mortgage insurance underwriting occurs when the borrower has a mortgage of more than 80% of the value of the property. The loan is submitted to a private mortgage guaranty insurer, for insurance to the lender in case of default.
Closing
Ah, Closing. Somehow, no matter how prepared everyone is, this day rarely goes off without a hitch! High anxiety, as closing papers are drawn and delivered to the escrow agent or closing attorney and arrangements made to transfer funds. Title will have been ordered, delivered, and approved by the Lender; proof of homeowner’s insurance will be taken to the closing, and funds needed by the borrower will be certified.
If this is a purchase, funds will change hands on this day. For refinances, there is a three-day right of recission, which means funding will take place three business days later than closing.
