Most buyers utilize some kind of financing to complete the purchase of real estate. Choosing a lender is a very important first step. As Realtors, we have quite a lot of insight and experience when it comes to lenders and who may be the best fit for you. I have the inside scoop as to who actually delivers on the many promises expressed at the application stage, who offers strong communication and who closes on time, the majority of the time…Below you will find a basic overview of the lending process. Since every buyer and property are unique, you can expect differences.
Step 1. The Loan Application
The key to the loan process going smoothly is the initial application interview. At this time, the lender obtains all pertinent documentation so unnecessary problems and delays may be avoided. Full disclosure is important. If there is anything you can think of that may impact your ability to obtain financing, this is where you talk about it. Most speed bumps can be overcome if they are known early on. Quite likely, what you feel is a big thing, may not be at all. Bring all your questions and concerns to this initial meeting. Once you have completed your loan application, your lender will pull your credit to see what loan programs are available.
Step 2. Requesting Documentation
At this point your lender will provide you with a list of documentation that they and underwriting will require. Be patient, you may be asked for the same documentation several times. Your lender will need 2 years taxes and/or W2s, will perform verifications of employment, obtain picture ID, request a Certificate of Eligibility and DD214 (VA only), and any other necessary supporting documentation. (see Mortgage Loan Checklist at the bottom of the page for more details) At this point, you meet the basic approval criteria, you will be equipped with a pre-approval and you can be confident that when you find the right home, you are able to write an offer.
Step 3. Loan Submission
Once all the necessary documentation is in, your loan processor will put the loan package together and submit it to the underwriter for approval. Once your lender has gathered all the required documents, your file will go to underwriting who will review it, ask for clarification where needed and possibly ask for additional documents.
Step 4. You have found your property and your offer is accepted!
Once you have identified the property you want to call home and have a mutually accepted offer, your lender will collect information regarding the property. This includes the Preliminary Title Report and the properties appraisal. We find ourselves in a market where the appraisal process takes much longer than it used to. So to avoid closing delays, we will discuss whether you should consider ordering your appraisal upon mutual acceptance of your offer. This is especially important IF you hope to close in 30 days.
Step 5. Loan Approval
At this point the lender may even pull credit or call your employer to confirm no changes have occurred. If there are additional underwriting conditions or requirements, you will need to quickly address. From this point, your loan approval will take anywhere from 24-72 hours.
Step 6. Documents are Drawn
Within 1-3 days after the loan approval, the loan documents (including the note and deed of trust) are completed and sent to the title company. This is where some newer requirements kick in and where it is vital that we have a conversation regarding your signing of documents and your possession of your new home. TRID, it is a federally required 3 business day delay to your singing loan documents. The 3 business days are for your review of your loan documents and the 3 day period cannot even begin until you acknowledge receipt of the loan disclosures. If there are two signers, you both must acknowledge receipt for the timeline to begin. Now that our title company has your loan docs, they are able to calculate the total amount of funds you will need to bring to closing in order to fully fund and close your loan. After I review the settlement statement for accuracy, I will help coordinate the signing at our title company.
Step 7. Funding
Once you, have signed the loan documents, they will be returned to the lender, who then reviews the package one last time prior to final approval. If all the forms have been properly executed and there are no last minute underwriting requests, the funds will be transferred by wire to the title company.
Step 8. Recordation
When the title company receives the funds from your lender, our Escrow Officer will authorize recordation of your signed documents with the County Recorder. He/She will then prepare a final settlement statement, disburse the proceeds to the seller, pay off the existing encumbrances and other obligations.
Step 9. You are on record! Congratulations, you have your dream home!