From Application, and Underwriting, to Closing - THE MORTGAGE LOAN PROCESS
Prequalification / Pre-Approval
Congratulations - you've decided to buy a home. This is where it all begins. Your lender will need to obtain an initial application, gathering information about you, your credit, income, assets, and debts. This lets the lender make a financial determination about how much house you may be able to afford, what type of down payment you may need, and what your new homes payments might look like.
There are no obligations, and you are not committing yourself to anything when getting pre-approved.
It is smart to get pre-approved BEFORE talking to a real estate agent so you have a good idea 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.
Full Mortgage Application
The official application process begins when you have found the exact house you will buy, or decide that you wish to refinance the loan on your existing home.
You will sign all the application paperwork and disclosures for your exact loan program. This includes the Good Faith Estimate (GFE) and Truth-In-Lending (TIL) disclosures. You will need to supply all of the required supporting documentation for processing your loan, like recent pay stubs, W2's, bank statements, etc.
The Processing of your Mortgage Application
Upon receipt of your signed application and supporting documentation, the lender will begin processing your application. They start with verifying all the minimum documents are in the file, and then order your appraisal and title company commitment.
Next they will submit the application package through the appropriate automated underwriting system (AUS) that will provide the lender with the necessary computerized loan approval. In some cases, your application will fail the automated approval, and will be manually underwritten. Processing also will review the file to see if the Loan Officer missed anything, and if so, will ask for the items before the file is sent to full underwriting.
Underwriting your Application
With everything now in your file, the applications moves to full underwriting. The underwriter's job is to verify everything in the application is true and correct, and to determine if the file meets the loan program guidelines. If more information is needed, you will be contacted to supply more documentation. Getting additional information is very common at this stage, and nothing to be worried about.
If the underwriter approves the loan, the lender issues a conditional commitment to lend, pending any and all conditions are met.
Yippie! You are Fully Approved!
This is known as Clear-to-Close. This is when the Underwriting Department has fully approved your application. Everything has been completed, and there is nothing left to do except schedule the closing date and time, and for the lender to prepare the final documents you will sign at closing. The lender will send the final loan paperwork, instructions, and wire the money to the title company, who will prepare your final settlement statement showing the exact dollar amount needed to close (if any). We usually don't have these final numbers until just a few days before your closing.
The Big Day - The Loan Closing
The closing is where everything comes together. Here in Minnesota and Wisconsin, we typically close with a Title Company. We are known as a "wet" state, which simply means everything is 100% completed when you sign.
At the closing, you will sign all your final loan documents, including a promise to pay, and the mortgage, which secures your promise to pay.
The title agent will have you sign all the mortgage company paperwork, disburse the money to the seller (purchase) or pay off the existing lender (refinance).
In a purchase, this is also where the title to the property is transferred, and you will be handed the keys to your new home.