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Mortgage Loan Process - What is it?

Apr 22, 2008
I have a web site that covers the mortgage loan process. I thought it was comprehensive but I get at least one question a day about the loan process. Perhaps it is only unclear because many things actually happen in parallel.

The first thing you should always do is shop interest rates and find a local mortgage broker that you feel comfortable with, is experienced and reputable.

First Step, Application:

You should go into the brokers/bankers office and you fill out a 1003 (loan application). You should also bring in your bank statements, retirement accounts, 401ks, W2s and tax returns and what ever else the Loan Officer requested. The Loan Officer makes copies and gives you back your originals.

An application can be filled out on line but I really don't recommend you do that. Filling out an "on line" application is ok if you know whom you are dealing with and they are local. This could possibly save you a trip to the office but you really need that eye to eye contact. You should never just fill out an application on line if you don't know who they are or if they are not local (even if they are a major branded company). Do not complete any request that suggest multiple offers as these companies sell your information over and over. This is not good.

During the time you with the loan officer he will review your documentation and with most companies he will pull your credit report while you are with him. If you are unsure at this point, tell them NOT to pull your credit but remember until they do they can't give any firm commitments.

After the documentation review the Loan Officer will tell you "based on the information he has" that you qualify for "this type" of loan. He should at this time tell you about all loan types you qualify for. You should talk about the advantages and disadvantages. He will also discuss interest rates and terms.

At this point you guys decide on your course of action. HE SHOULD AT THIS TIME GIVE YOU A GOOD FAITH ESTIMATE. The LO then puts all your official paper work in the file and turns it over to the processor.


The processor makes sure all the documents are in the file, puts the paperwork in order, enters it into DU or LP (automated systems) and then receives an automated approval or turn down. This is always "subject to" supporting documentation including appraisal, inspections, and title work.

Processing then verifies employment, verifies residence, orders an appraisal, and orders a title search and title insurance. I won't go into the documentation requirements here but this is when things start to happen in parallel.

After the processor has received all these verifications back, the appraisal, and basic title work, they will review the file again and if it still qualifies they will forward the file to the lender's underwriter.

At this point the processor does not have a title policy or guarantee, but the title company has reported that there are no clouds on the title. Shame on the processor if she forgot to order this because it can delay your loan later. The actual title policy is not issued until later when the underwriter gives a "clear to close".

The Underwriting Process:

The lender's underwriter reviews what is in the file, runs the numbers, and verifies that all of the documentation is present and that it supports the DU or LP approval.

They also review the appraisal and the title at this time. This is part of the underwriting process. If there are problems in the appraisal review or title they will address them to the processor. The underwriter will also do some reverification of employment and bank statements. They will always pull your credit again just before closing.

The processor will communicate with the LO and appraiser and/or title company to resolve the issues. This is part of the underwriting process. The processor collects the requested "stuff" and then forwards all information to the underwriter.

Only when the underwriter is happy will they give an "ok to close". This ok is usually subject to receiving the title insurance policy from the title company. The title company faxes or transmits electronically the info to the lender. Then the Lender sends the closing documents to the closing company. This can sometimes take two to three days.

You have an appointment to close. You sign the documents and your loan is closed and you get the keys.

Processing only take a week after you have provided all the documentation requested. The underwriting normally takes about 14 to 28 days. This time includes communicating with the processor if there are any deficiencies.

Every loan file is different; each Lender has different requirements and markets vary, so it is impossible to give an exact duration for each step.

The Key: Understand the sequence and demand your loan officer gives you full details about what is going on. If you don't understand don't be afraid to say so. This is YOUR investment. Demand the facts. LO's sometimes use industry terminology, ask what they mean if you don't understand!
About the Author
Connie Sanders talks with homebuyers every day helping them understand mortgage guidelines and what their best options are. Learn more about the mortgage loan process and your options at: http://www.mortgageunderwriters.com
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