Understanding the Six Essential Steps of the Mortgage Application Process
In general, the mortgage loan process involves Application Acceptance, Offer for Property, Loan Application, Loan Processing, Underwriting of the Loan, and Release of the Loan Amount, or Closing. There"s more to it, and we"ll get to that in a minute.
Every lender has its unique way of operating the Mortgage Loan Process. It's important that all the "boxes are checked" so the process can move forward without errors. It's a critical process for customers as well.
For the first time buyer, the process is filled with confusing and arcane terms and procedures. Even experienced buyers can be confused by the complexity of it all. For most applicants, there is a lot riding on a Mortgage Application Process, it can be a tense time for them and that adds extra pressure for accuracy. From the broker"s perspective, not being clear or complete on all the terms of the deal and the mortgage usually means that the deal falls through.
But a buyer, armed with the knowledge of the Mortgage Process because they were willing to do the homework, stands a good chance of getting a better deal on a purchase than an uninformed buyer who walks into the market like a lamb to the slaughter.
Learn and understand the Mortgage Loan Processing Steps. Avoid being one of those "lambs".
Mortgage Process Steps:
- Mortgage Pre-Approval
- Home Hunting and Offer
- Loan Application
- Loan Processing
- Mortgage Underwriting
- Mortgage Closing
Surviving the Mortgage Loan Process
The Steps to Getting a Mortgage are pretty straightforward, but they"re couched in sometimes confusing language and in intricate actions. And from the Initial Mortgage Loan Application to The Closing, there is a huge amount of paper (and digital) records and forms and "sign this and sign that" involved in the Mortgage Timeline Process. With a little bit of preparation, your path to ownership can be a little less painful. Some early steps in The Mortgage Approval Process should be handled even before you begin talking to an agent about looking for a home or a lender about how to qualify for a Mortgage Loan.
- Getting preapproved for a mortgage is an important first step in a Housing Loan Proposal. You and your agent will talk with a lender, or lenders, and make a choice based on financing terms and fees. Then you will provide the lender proof of income, previous and current debt, and other financial information
- Expect lenders to investigate and confirm all of your financial life so they are confident you will repay your mortgage. It"s important for you to know what a mortgage preapproval does and how to increase your chances of getting one.
- Credit history
- Credit score
- Debt-to-income ratio
- Employment history
- Assets and liabilities
- Getting a preapproval letter gives you the chance to discuss loan options and budgeting with the lender, which will help you focus on your budget and the monthly mortgage payment you can handle. Potential buyers should be careful to estimate their comfort level with a given house payment rather than immediately aim for the top of their spending limit.
Home Hunting and Offer
- Once pre-approved, start looking for a home that will fit your needs and your budget. Your pre-approval will probably include a cap on the amount of your loan. When you find the right house, make an offer
- The seller could:
- Accept the offer
- Decline the offer. if your offer wasn't high enough to negotiate
- Counter-offer. The seller makes you an offer lower than the original price
- You can negotiate back and forth until you reach an agreement
- Once your offer is accepted, you sign the purchase agreement. You"re now under contract.
- Contingencies should be in the written offer. These are things you state must happen before the process continues. Some are that the deal hinges upon you obtaining financing within a specified time. Another may require the completion of a home inspection or certain repairs. But including too many may scare the seller away from your offer
- This step requires you to produce information or records about employment, education, income, spending, debt, installment payments, rent, or a previous mortgage. All the things that will be considered to grant you a loan. Closing a mortgage transaction takes about 45 days on average, so preparation is key because after your purchase offer is accepted, the clock is ticking. All mortgage applications, in one way or another, follow the format of the Uniform Residential Loan Application, with five pages of questions regarding your finances, debts, assets, employment, the loan, and the property. Since you"ve been pre-approved, you can take a look at the actual application then, so there should be no surprise then it"s time to choose the type of loan
- A 30-year fixed-rate mortgage is a home loan with an interest rate set for the entire 30-year term
- A 15-year fixed-rate has a lower interest rate and higher monthly payments
- An adjustable-rate mortgage has an initial rate that"s fixed for a period of time, then adjusts periodically
- The lender takes the application and thoroughly examines it for clarity, and correctness then verifies all documents necessary to prepare the loan file for underwriting. These documents provide the lender with everything that they need to know about the borrower and the property you" refinancing. As the loan processing continues, the application passes through more and more scrutiny During The Mortgage Document Processing, the lender begins verifying assets, income, and employment. They"ll open a file and get the wheels in motion. The documentation requested by underwriting routinely includes:
- Evidence of Earnest Money
- Asset Verification
- Borrower Letter of Explanation
- Gift Letter
- Copy of Note
- Source Large Deposits
- Verification of Employment
- Fully Executed Sales Contract
- Loan processors gather documentation about the borrower and property and review all information in the loan
- Order credit report (if not already pulled for a pre-approval)
- Start verifying employment (VOE) and bank deposits (VOD)
- Order property inspection if required
- Order property appraisal
- Order title search
- Orders a home appraisal to determine the value of the property
- Mortgage Underwriting Process Steps is the method a lender uses to determine if the risk of offering a mortgage loan to a particular borrower under certain parameters is acceptable. However, it is always up to the underwriter to make the final decision on whether to approve or decline a loan. To help the underwriter assess the quality of the loan, banks and lenders create guidelines and even computer models that analyze the various aspects of the mortgage and provide recommendations regarding the risks involved. Automated underwriting guidelines are a crucial determinant of whether a mortgage will be made and at what price. Not all loans are the same. Certain aspects of the loan may compensate for a lack in other areas. For example, a high Loan to Value can negate the presence of a large number of assets. Low LTV can offset a borrower with high debt to income ratio, and excellent credit can overcome the lack of assets.
- The mortgage closing is a complex process where the lender is to provide a closing disclosure document that details the entire transaction, including a breakdown of the closing costs and fees. The following may be present:
- Your real estate agent or realtor
- Your title insurance company
- An escrow company
- Your attorney
- The seller"s attorney
- When purchasing a home with a loan, the closing of your loan (the time when your loan becomes final and the funds are distributed) and the closing of your home purchase (when you become the owner of your new home) typically happen at the same time. Once the closing is complete, you are legally required to repay the mortgage Mortgage Closing will include documents and statements regarding Title insurance, Mortgage commitment, Amortization schedule, Title search, Survey deed, and the closing statement. Depending on what state you live in, all the parties may sit around a table and sign all the documents at once. Or the closing could take several weeks as the signatures of each party are collected separately.
How to Tame the Mortgage Process
The Mortgage Process is a multi-faceted hyper-detailed set of responsibilities. Many different "micro-tasks" requires precise knowledge to complete. If one person on your staff is handling all of the different functions involved in Loan Origination - Background Investigation, Property Assessment, Accounting, Financial Checking, Document Examination, Mortgage Underwriting, and so on, not only are they crazy busy, but the workload will soon crush them. And before it does, there will be plenty of mistakes to clean up.
While the Mortgage Crises of 2006, and the crash of Mortgage-backed Securities in 2008, and The Great Recession of 2009 was a devastating blow to the U.S. Mortgage Industry, the recovery has created new opportunities. The survivors have found new ways to remain profitable in the Brave New World of Mortgage lending.
For lenders, the complexity of the process makes an experienced, professional staff a key element in continuing, successful operation. But the job market is a highly competitive and volatile one, with the best producers commanding higher and higher wages and other compensation.
All of these challenges force the question: How do you scale up your enterprise while cutting costs, trying to remain viable in a cutthroat Mortgage Market?
Ever consider Mortgage Outsourcing Services (a Mortgage BPO) as a solution? A firm like Rely Services?
We will provide a professional, highly trained staff ready to go. At a fraction of your current cost. This can mean huge savings in overhead.
When you chose Rely Services as a partner, you"ll be profiting from a professional operation delivering on time and on budget. We don"t just offer Employment Verification and Verification of Documents for your clients, we offer you clear documentation of our performance.
Rely Services leads the industry to incompetence and transparency. Our experienced professionals offer high-confidence accuracy, superb data security, quick processing times, efficiency, and flexibility at a cost we think you will find amazing.
We"ve thrived in the Mortgage Services sector and we can bring that expertise to your operation today!