Pre-qualification initiates before the formal loan process and serves as the initial step after the initial contact. The lender collects details about the borrower’s income and debts, making a preliminary assessment of the affordable housing range for the borrower. Different loan programs may yield varied values based on qualification criteria, necessitating pre-qualification for each applicable program.
The application marks the commencement of the loan process, typically taking place within the first five days. The borrower, now termed a “borrower,” completes a mortgage application with the loan officer and submits all required documentation for processing. Discussions about various fees and down payments occur at this stage, and the borrower receives a Good Faith Estimate (GFE) and a Truth-In-Lending statement (TIL) within three days, outlining rates and associated costs.
Processing unfolds between days 5 and 20 of the loan. The “processor” scrutinizes credit reports, verifies debts and payment histories, and handles the returned Verification of Deposits (VODs) and Verification of Employments (VOEs). Any unacceptable late payments or collections prompt a written explanation from the borrower. The processor also assesses the appraisal and survey, checking for potential property issues requiring further attention. The processor’s role is to compile a comprehensive package for lender underwriting.
Lender underwriting transpires between days 21 and 30 or earlier. The underwriter evaluates whether the package presented by the processor qualifies as an acceptable loan. If additional information is necessary, the loan enters “suspense,” prompting the borrower to provide more documentation.
Mortgage insurance underwriting is necessary when the borrower contributes less than 20% of the loan amount as a down payment. The loan is submitted to a private mortgage guaranty insurer for extra protection in case of default. If more information is needed, the loan is placed in suspense, otherwise, it is typically returned to the mortgage company within 48 hours.
Pre-Closing spans days 25 to 30. During this period, title insurance is ordered, any approval contingencies are met, and a closing time is scheduled.
Closing typically unfolds between days 25 and 45, depending on the designated length of the escrow. At the closing, the lender disburses the loan using a cashier’s check, draft, or wire transfer to the selling party in exchange for the property’s title. This marks the culmination of the loan process, and the borrower officially becomes the homeowner.