To reach full loan approval, your loan application goes through various steps of verification, documentation, processing, and underwriting before your closing date. Check out the step-by-step process of your loan from application to closing.
1) Loan Application
Your loan application is one of the preliminary steps to getting the ball rolling on your home financing. You can fill out a loan application in person with your mortgage banker, or depending on the lender, you can start the process over the phone or online. If you’ve already been pre-approved, you may have filled out some of the application details already.
Completing the loan application includes giving information regarding employment, finances, and the home you are purchasing or refinancing. You should also be prepared to provide the following documents and information:
- W-2’s for the last two years
- Two most recent pay stubs
- Last two months’ bank statements for all financial accounts, including investments
- Last two years personal tax returns
- Photo I.D.
- Two-year residency history
Self-employed, or those individuals paid on commission, will also need to provide two years federal and business tax returns.
2) Submit File to Processing
After your application is received, it is reviewed by a processor to make sure the information within your application is complete and accurate. Processors look for errors, discrepancies and other things that may need clarification for your loan to get approved. Your loan processor will also verify your employment, rent, etc. Your processor will also search for debts that you may have forgotten to disclose during the application process.
3) Order Appraisal
Your lender will then order an appraisal to be performed by a licensed appraiser – which is typically needed for the mortgage to be approved and financed. Appraisers will consider comparable properties that have sold recently and general condition, age, location, size and features of the home to determine the fair market value of the property.
Perhaps one of the most important steps of the process is underwriting. Without the approval of the underwriter, your loan will not fund. The underwriter has final approval and final responsibility for the loan. It is the job of the underwriter to make sure all the factors of your approval meet particular loan guidelines.
Before your loan is sent to underwriting, your loan officer and loan processor compile your application and supporting documents to read like a story. They provide verifications for employment, income and assets. For borrowers with limited credit history, your loan officer and loan processor may provide the underwriter with non-traditional credit sources. For borrowers who have had discrepancies in income, employment or credit history, documentations and explanations will also be provided to the underwriter.
The above documentation gives the underwriter the “whys” that will allow him or her to make an informed decision about the borrower’s credibility.
Closing is the last piece of the puzzle. At closing, the formalities of your real estate transaction are concluded and the home is legally yours. The borrowers will sign mortgage documents, the sellers (if buying) will execute the deed to the mortgage, and funds will be collected and distributed. A closing agent is present to the walk borrowers through the paperwork and to answer any questions that come up throughout the process.
If you have any specific questions you would like to be addressed please feel free to contact any of our Mortgage Bankers
at your convenience.
Looking for more information about the mortgage process? Our Mortgage 101 Handbook
is a great go-to guide for first-time homebuyers.