Prequalification occurs before the loan process actually begins. I will need to gather information about your income and debts, and make a financial determination about how much house you may be able to afford.
It’s a good idea to know how expensive a home you can afford before you start shopping for one! If you are refinancing the loan on your existing home, then the prequalification process should help you decide whether refinancing is a good idea for you.
The application is the beginning of the loan process and either occurs after you have found a property you want to buy or have determined that you wish to refinance the loan on your existing home. You complete a mortgage application for a particular loan program and, supply all of the required documentation for processing. Various fees and down payment options are discussed at this time. I, or our Disclosure Department, will deliver (or email) an Initial Loan Estimate (aka “LE”) within three days that itemize the current market rate and estimated costs for obtaining the loan. After the LE has been reviewed and an Intent to Proceed form is signed, the processing of your estimated loan can continue.
Processing of your Estimated Loan
During the prequalification process, I will submit your loan details and credit report through an automated underwriting system that will provide a list of the necessary documentation needed for an initial loan approval. In some cases, the underwriter may need to manually underwrite the application package.
Along with our processing team, I will review the credit reports and documentation to verify your employment, debts, and payment histories. If there are any unacceptable late payments, collections, judgments, etc., I will need to obtain a written explanation from you. I also reviews the appraisal and prelimintary title report to check for any potential property issues that may affect final loan approval. My goal is to put together a detailed, complete package, along with a coverletter for the underwriter to review.
The underwriter is responsible for determining whether the application they’re reviewing meets all the lender’s criteria. In most cases, an underwriter will request additional information and/or documentation. The items are called “prior-to-doc conditions”, or PTDs.
Closing/Loan Doc Signing
The closing will occur after all conditions are cleared and the lender issues a full loan approval and the file is sent to a closer. The closer verifys the closing cost, vesting, and terms of the loan to prepare the loan documents, and issue the Initial Closing Disclosure (aka “CD”). Once the CD is issued, the law requires a 3-day waiting period before loan documents can be signed. The 3-day waiting period begins when the CD is signed. For refinances, an additional 3-day waiting period is in place for owner occupied loans, after the loan documents are signed.
After loan documents are signed, the file is assigned to a funder. The funder reviews the signed documents for any errors or missing pages. For purchases, they also verify the wire to cover the down payment and closing costs (aka “final funds wire”) has been received by the Escrow Company/Settlement Agent. Upon all the prior-to-funding items being cleared, the funder orders the funds wire to be sent to the Title Company. The title company will balance their figures and set the file up to record with the County Recorder’s Office either the same-day or the following business day. Once the deed(s) are recorded, the file is officially “confirmed”. For a purchase, this means the buyer is the official, legal owner of the property. For a refinance, this means any liens on the property are being paid off and the new loan is put in place.