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What Are the Home Financing Steps?
When a lender receives a mortgage loan application, it’s the beginning of a process that has several steps. For those who have yet to buy their first home, the number of steps involved might seem a bit overwhelming at first but in practice these steps are taken one at a time and aren’t completed all at once. In fact, getting a home loan approved involves completing multiple steps along the way before the loan papers can make it to the escrow agent for a closing. We’ll lay out the various steps involved and what you can expect as you get from the application stage to final approval.
This is where you start, your preapproval. A preapproval is an initial evaluation of how much you can afford as well as validating important facets of your financial profile. You will begin this journey with a simple phone call or an office visit with a loan officer. Here, the loan officer will have a conversation about what you want to accomplish and when. The loan officer will ask about your income and employment as well as a general idea about your credit. Once your application has been submitted and your credit report reviewed, you’ll also be asked to provide copies of your pay check stubs, W2s and bank statements. Based upon your own goals and financial considerations the loan officer will provide you with a list of loan options from which to choose as well as provide you with your preapproval letter.
With your preapproval letter in hand, it’s time to find that perfect home. But to take the process to the next level you need to identify the home you want to buy. At this step, you’ve already submitted the documentation requested by your loan officer. Once you have an accepted offer, the lender then orders a property appraisal report, a preliminary title report and other third party services needed in order to document and fully approve your loan. Once the requested documentation has arrived at the lender’s office, the loan then moves to underwriting. The underwriter reviews the application and supporting documentation to make sure the loan application is in full compliance and is in line with lending guidelines. Once the underwriter signs off on the loan, your loan papers are electronically delivered to the escrow agent and your closing will be scheduled. At your closing, the escrow agent will oversee your settlement and follow the instructions sent by the lender. After your papers have been signed the escrow agent will then send the signed documents to the lender for a final review. Your loan will then fund the same day when you signed.
Refinancing an existing mortgage follows much the same process as a loan used to purchase a home. You will complete a loan application either in person or online and submit it to your loan officer who will again submit your application to an automated underwriting system which will spell out the items needed to complete your loan approval. The lender will then order the necessary third party documentation needed including such items as a property appraisal, title and other third party services. Once the file has been documented per the terms of the approval, the loan will go into underwriting for a review. Once the loan is approved by the underwriter, closing papers will be delivered to your escrow agent and a closing date and time will be scheduled. At your closing, the escrow agent will follow the lender’s instructions and then returned the signed loan papers to the lender. With a refinance, there is a mandatory three-day waiting rescission period before the loan will fund.
Cross Qualification Steps
As the seller’s preferred lender, we are asked to review each buyer’s financial qualifications including validating sufficient income, assets and acceptable credit scores. To document the cross qualification, we will ask for recent bank statements showing sufficient funds to close, documentation of income, credit qualifications of all borrowers on the application and make sure the accepted offer is not contingent upon the sale of an existing home. You will receive via email a list of requested paperwork and a link where you can upload the requested documentation to a secured website. Once the documentation has been received, the cross qualification is typically accomplished in as little as four hours.