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Prequalification
Prequalification occurs before the loan process actually begins. The lender
gathers information about your income and debts, and makes a financial
determination about how much house you may be able to afford.
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 prequalification process should help you decide whether refinancing is
a good idea for
you.
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Application
The application
is actually the beginning of the loan process and usually occurs after you have found
a property you want to buy, or, have determined that you wish
to refinance the loan on your existing home. You complete
a mortgage application for a particular loan program, and, supply
all of the required documentation for processing. Various
fees and down payment options are discussed at this time.
The loan officer will deliver a Good Faith Estimate (GFE)
and a Truth-In-Lending Disclosure (TIL) within three days,
that itemize the rates and estimated costs for obtaining the
loan.
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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
for your specific application. In some cases, the lender may
also manually underwrite an application package.
The lender's processor reviews the credit reports and documentation
to verify your employment, debts, and payment histories. If
there are unacceptable late payments, collections for judgment,
etc., the processor requests a written explanation from you.
The processor also reviews the appraisal and survey and checks
for property issues that may affect final loan approval. The
processor's job is to put together an entire application package
for the lender's underwriter.
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Underwriting
The lender's underwriter
is responsible for determining
whether the application package prepared by the processor
meets all the lender's criteria. If more information is needed,
the loan is put into "suspense", and you will be
contacted to supply more documentation.
If 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.
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Closing
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 with a cashier's check,
draft or 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 occur
at different places in different states. For instance, some
states require that the closing take place at a closing attorney's
office, while others use a title or escrow company.
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