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The Loan Processing Cycle
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The first step is determining what type of loan you desire and also what you qualify for. Sometimes these can be two entirely different things. It's always best, if you aren't sure about your qualifying capabilities to do a prequal with an experienced loan broker. This entails a quick credit pull and a few pieces of information over the phone and takes about 5-10 minutes. He or she can calculate your debt to income ratios, and also review your credit history and credit scores. |
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The second step is deciding what loan you want to go with. Once you have decided, then your officer will take your loan application and originate the loan. You will receive your paperwork by mail or in person, and he will pick up all your loan documentation including your paystubs, W2s, 1009's, mortgage statements, bank statements, homeowners insurance, etc. He should provide a checklist to you in advance so you know what you'll need to have ready. |
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The third step is the loan processing cycle which can take from as little as two weeks and up to 4 weeks depending on how busy certain professionals are including title companies, appraisers, pest control people, home inspectors, realtors, etc. Usually title and appraisal take the longest time, although in some cases, a subordination agreement can take up to two weeks. A condo cert may take a week depending on how backlogged the property management company is at the time of the request. |
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The fourth step would be underwriting the file. Many of the larger wholesale outlets permit mortgage brokers to obtain the loan approval with conditions online. This really cuts down on the time necessary for an banks to underwrite a file. Once a file has been submitted to underwriting, it goes into an underwriting cue and can take from 24-72 hours in most cases. When completed, the underwriter faxes the broker the approval with the loan conditions or a denial letter with the reasons explaining the denial. |
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The fifth step is complying with the conditions which means the broker needs to get any remaining documents necessary from either the borrower, title, the appraiser, or other professional performing services on the transaction. Once all conditions have been signed off, the file can move onto the loan document department. |
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The sixth step is drawing the loan documents. The person drawing these checks with the broker to verify all the terms are correct. The docs are normally emailed or overnighted to the escrow company handling the transaction. The borrower is contacted to set up an appointment for the signing. Once they are signed and notarized on the appropriate pages, the docs are returned to the lender usually by overnight mail. |
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The final step is preparation for the funding of the loan. The funder will review the loan docs for possible problems which could have occured during the signing. Some banks will not allow a borrower to undersign the documents unless there is an alternate signature on the borrowers AKA statment. (also known as). Thus, when a notary allows someone to sign all the papers as J. Doe, when underneath every signature line it says John Doe, this can create a problem and delay the loan from funding. There are other similar problems which can occur, including missed signatures, documents which were supposed to be notarized but didn't receive it, etc. If everything is in order, the loan will fund and the money is first sent to the title company, which will pay off any mortgages being paid off as well as any property taxes required to be paid, tax liens, and the title company fees. Any remaining balance is wired to the escrow company, who will make any further disbursements to parties of the transaction. Finally the deed of trust and any other recordable documents will be sent for recording at the recorders office in the county in which the property is located. Escrow will then send out closing packages to all parties involved. |
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