Getting a mortgage shouldn't be a chure. Many think getting a mortgage is getting harder with the ever increasing house prices, but this is far from the truth. Getting a mortgage is becoming harder for those who are borrowing more money and are struggling to pay it back on time, how ever those with good credit will not find grief in getting a mortgage (subject to circumstance).
The Loan Process
Your mortgage loan generally requires documentation from many different sources.
You may also be required to provide income documentation, asset documentation, and employment documentation.
The appraiser may need to provide an appraisal report that will stand up to scrutiny.
The title company will generate a preliminary title report.
Your current lender will need to give you a mortgage payoff if you are looking to refinance.
All of these things take time, and any one of them can turn into a choking point.
Other sources of loan delays can include an unclear contract when you are purchasing a home.
If there are numerous offers and counteroffers that are included as part of the purchase agreement the language may be unclear. This may cause a lender at the last minute to stop sending out the loan documents for signature.
Your insurance company may need to generate a new hazard insurance policy or provide a new one. Make sure they are available to get things done. Getting a mortgage can be held up because of insurance paperwork.
In a purchase transaction make sure all parties are available if updated loan documents need to be signed. Sometimes one of the parties may be moving out of a property to another town and are difficult to reach and get signatures from.
Make sure you are available during the mortgage process during normal business hours to resolve problems as soon as possible. Usually the loan officer will serve as a project manager on the mortgage but you may be needed to help from time to time to move the process along.
The Process In Detail
So you have found the perfect home that you want to buy. Now comes the process of obtaining a loan to buy it.
If you are not familiar with the mortgage process - maybe you are a first time buyer, or have not purchased a home in a long time - below is a quick summary of the five steps involved in getting a mortgage.
Prequalification
Before you actually go through the paperwork of a loan application you will be asked to 'pre-qualify'. Your estate agent may refer you to a lender to get you a descision in principle so that when you look at houses, the sellers know that you are a serious buyer with the money to back up any offers you make.
In prequalification, the lender gather information from you about your income and debts, and makes a financial determination, subject to later verification during the underwriting process, about how much home you may be able to afford.
It's good to know how expensive a home you can afford before you go shopping for one.
Application
The 'application' is actually the beginning of the loan process, and occurs after you have found a property that you want to buy. You complete a mortgage application with the loan officer and supply all of the required documentation for processing. (tax returns, pay stubs, etc.) The type of mortgage best for you and the various fees and down payment options are discussed at this time. You will receive a 'Good Faith Estimate' that itemizes the rates, payments, and all the costs involved in your new loan. At this time you may 'lock-in' the interest rate of the mortgage at today's going rate.
Processing of Your Estimated Loan
The lender enters your information into the underwriting system, which provides the lender with a list of the documentation needed to achieve loan approval. The 'processor' reviews your credit reports and documentation to verify your employment, debts, and payment history. If there are late payments, collections, etc. the processor will request a written explanation from you. The processor also reviews the property appraisal and checks for issues that may effect the final loan approval. The processors job is to put together the entire package for the underwriter.
Underwriting Your Loan
The 'underwriter' is responsible for determining whether the package prepared by the processor meets all the lenders criteria. If the lender needs more information, the loan will be held up until the lender contacts you and you provide the additional information or documents.
If the application package meets all the lenders criteria, then the lender will offer a full loan approval. This often depends on the resolution of challenging credit, income or property issues that arise during the underwriting process.
If the underwriter gives full loan approval then the lender issues a commitment letter to lend, orders the title insurance, clears all contingencies, and then schedules a closing time.
Closing
The 'closing' will occur after the lender gives a full loan approval and clears any closing conditions. At closing, the lender 'funds' the loan with a cashiers check, draft or wire to the closing agent who disburses funds in exchange for the title to the property. This is the point at which you finish the loan process and actually buy the house, subject to the lenders loan. Closings occur at different places depending on the State in which the sale takes place. In some states, a title company or escrow company is used, while other states require that the closing takes place in an attorney's office.
