The Loan Process
Pre-qualification occurs before the loan process actually begins. The lender gathers information about your income and debts, and makes a financial determination about the loan amount you qualify for.
It's a good idea to know 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 pre-qualification process should help you decide whether refinancing is a good idea for you.
The application is the beginning of the loan process. You complete a mortgage application and supply all of the required documentation for processing. Various fees and down payment options are discussed at this time. It's alway recommended that you get pre-approved prior to you begin looking for a property to purchase to ensure you qualify for what you want.
Processing of your Estimated Loan
The lender will typically submit the application package to an automated underwriting system that will provide the lender with the necessary documentation needed for loan approval. In some cases, the lender may also manually underwrite an application package.
The lender reviews the credit reports and documentation to verify your employment, debts, and payment histories. If there are unacceptable late payments, collections, judgments, etc., the lender may request an explanation from you. The appraisal and survey are reviewed for property issues that may affect final loan approval. The entire application package is assembled and submitted to an underwriter.
The underwriter is responsible for determining whether the application package meets all of the lender's criteria. If more information is needed, you will be contacted to supply additional information.
Once the underwriter approves the loan, the lender issues a conditional commitment to lend, orders title insurance, works with you to clear all conditions to its commitment to lend, and then schedules a closing time. Conditions to the lender's commitment may include issues with credit, income, or the property that may arise during the processing and underwriting process.
The closing will occur after all conditions are cleared and the lender issues a full loan approval. At the closing, the lender "funds" the loan by sending a wire to the closing agent, who disburses funds, in exchange for the title transfer to the property. This is the point at which you finish the loan process and actually refinance or buy the house, subject to the lender's loan. Closings typically occur at a title company but exceptions can be made in extenuating circumstances.