The mortgage loan process incorporates several entities that work behind the scenes to insure the success of the loan. There are loan officers, processors, underwriters, closers, escrow officers, appraisers, property inspectors, various assistants, delivery companies, credit companies, realtors, attorneys, etc.
Before speaking with anyone about a loan, you should become familiar with your credit rating. You can get a free copy of your credit report each year. You can get it at AnnualCreditReport.com. You can also go the Federal Trade Commission's website which will then direct you to how to get your free copy of your credit report: FTC.gov. Once you know what is on your credit report you can begin the task.
1. Speaking with a loan officer to compose a loan application and discuss possible loan options is the first step. You can also ask questions about your credit. Once the data is collected, the loan process really begins.
2. The loan officer completes the application, calculations and provides a comparison of terms and fees. This usually is in the form of a good faith estimate and truth-in-lending disclosures. AS A CONSUMER, YOU ARE ENTITLED TO RECEIVE THESE.
3. You, as the borrower, need to review these documents and compare possible loans from different lenders. There is no obligation at this point from either you or the lender. This stage of the application is where a pre-qual letter might be issued. The difference between a pre-qual and pre-approved is as follows; a pre-qual is the loan officer determining that you meet the guidelines of the loan. A preapproval or credit approval means that your application has been approved by an automated underwriting program or reviewed by an underwriter.
4. Once terms for a loan are agreed upon, the loan officer collects data from you that supports the information on the application such as your income, assets, debts, etc. You can choose to lock or float your interest rate at this stage. Remember, if any information in the initial application changes, it could jeopardize the terms of the lock.
5. Your file is then turned into processing where the your information is verified and appraisal and title are ordered. Upon receipt of all needed items, your file is then submitted to underwriting. The underwriter determines if your initial approval meets the guidelines and that nothing has changed. If something has changed for the worse, it could alter the approval and cause the loan terms to change, i.e. the rate or down payment required.
6. During the processing stage, the appraiser will visit the property for an inspection, and the title company will send out a preliminary title report and identity statements for all parties. If the loan is a refinance, the appraiser will be calling you to access your home. The title company will also need very specific information such as social security numbers, date of births, previous marriages, etc. This information is necessary for them to properly verify the parties involved. It is safe to provide this information to the title company; the title company is the independent party that provides the checks and balances to the transactions. There are other activities going on at this stage that have nothing to do with the actual loan process but could affect closing of the loan, especially a purchase transaction. On a purchase loan, a termite inspection is required and usually a property inspection.
7. Once your file is ready, the underwriter audits the loan application to validate the processor's work and make sure the loan profile meets loan criteria. The underwriter will condition the file for further documentation if necessary.
8. This step can be frustrating because the loan officer can call you to ask any additional items listed by the underwriter. This usually happens right at the end of the process when you thought the loan was finished. Once those items are collected and reviewed by the underwriter, your file goes to the closing department or also known as the document preparation department. This department prepares your loan documents and forwards them to the title company.
9. The title company then prepares the documents for you to sign. After you sign your loan paperwork, your documents are sent back to the closing department where they are reviewed and cleared to fund. The money for your mortgage is electronically transferred to the title company, and your loan funds and records. This is where the actual title changes hands on a purchase.
10. Your loan file is then shipped to the servicing agent. The servicing agent is the company that has agreed to service your loan. This is who sends you a payment statement each month. They are who you call with questions about your payment and loan after closing. The servicing agent often changes within the first several months after the loan closing, which is a normal procedure. The rights to service the loan are often sold or traded. This provides liquidity to the market and helps keep the rates low.
This article about The Loan Process can be found in its original format at: AZMortgageAdvice.com on behalf of the Arizona Mortgage Advisory Council. The original format has been slightly modified to fulfill on GetPreQualified.com's mission of being focused on you, the consumer, personally. The Arizona Mortgage Advisory Council (AzMAC) is a group of community volunteers that have strong mortgage related backgrounds. The primary purpose of the members is to create educational materials for dissemination to the public. AzMAC's goal is to improve the advertising and selling climate of the mortgage industry.
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