The Loan Process
Prequalification occurs before the loan process formally begins. The lender gathers financial information from the borrowers and makes a conditional determination about their qualifications for a loan.
The application is the beginning of the formal loan process. The applicant completes a mortgage application with the Mortgage Professional and supplies all of the required information and documentation for processing. Various down payments and “closing costs” are discussed at this time and the borrower will receive a Loan Estimate form that itemizes the rates, loan fees, and associated costs for obtaining the loan.
The lender reviews the documentation and provides a loan package for the loan underwriter.
An underwriter determines whether the information provided is acceptable to offer the applicant a loan. If more information is needed, the applicant is contacted to supply it.
For a conventional loan, mortgage insurance is required when the down payment is less than 20% of the loan amount. FHA and VA loans also require mortgage insurance or similar protections.
During this period, title insurance is ordered, all approval contingencies are satisfied, and a closing date is scheduled for the loan.
At the closing, the lender “funds” the loan to the selling party in exchange for the title to the property. This is the point at which the borrower has completed the loan process and the transaction is “closed.”