Getting a mortgage today is a little different than it may have been just a few years ago. Lenders are now doing what they should have been before. Some might even say they are doing it a little too excessively! They are verifying everything! Gone are the days of having a good down payment or a good credit score and just getting the loan. Now underwriting guidelines are much tighter and they are followed to the letter. Don’t let this discourage you though. If you are even thinking about wanting to buy a home you should get pre-qualified or at least talk to a mortgage professional two to three months in advance of even starting to look for a home. This way if there is anything that needs to be corrected, like a credit issue, you will have the time to take care of it. It will also help you to learn the ins and outs you will need to know to get a loan. The following is an overview of the process to help you get started and get an understanding of the home loan qualification process.
Step 1: Fill out an application. You can generally do this at a lenders secure online application site. Click here for an example. If you would prefer most lenders will have an alternative option for you to either manually fill out an application with pen and paper or you can do it over the phone as well.
Step 2: Collect all of the documentation you will need for your lender to process your loan and get this information to them as soon as you can. Ideally you would send it to them immediately after you have completed the application. Items that would be required would be income documentation such as paystubs, W-2’s, and possibly tax returns. Asset information such as bank account statements along with investment account statements including retirement accounts. Be sure to follow the directions carefully. Don’t assume the lender doesn’t need something. One good example of this is when you send the bank statements and page 5 of 5 is blank most people often think they won’t need this because it doesn’t have anything on it. That is not correct. They need the full and complete statement. If they don’t have that page 5 of 5 that is blank how do they know it was blank? Federal tax returns require the full return with all schedules and not just the first few pages. If you do a full and complete job of giving the lender everything they need up front you will have a smoother and easier process of getting approved for your home loan. As a mortgage professional I certainly don’t like getting any more information than I have to, but not getting what is needed is even more frustrating. Click here for a more complete list of what you will need to gather up for your lender to get qualified for a loan.
Step 3: Now that we have a complete loan package along with your application and other disclosures prepared we need your signatures on the initial application. We can do this by email with a password protected pdf file. We always have the snail mail or to meet in person options available if you prefer.
Step 4: You return all of the signed and dated disclosures to us via email, fax, or regular mail.
At this point you have been pre-qualified to make a home purchase and we can issue a pre-qualification letter to you and your realtor to show that you are ready to purchase a home up to a maximum payment amount that you qualify for. In some cases if your scenario requires further approval we will submit your file to an underwriter for with a TBD (To Be Determined) address. This will help us clear up any questions that an underwriter may look at as unfavorable to your file. Once you have made an offer and have an accepted contract for a specific property we will move on to step 5 below.
Step 5: We submit your complete loan package to an underwriter.
Step 6: The underwriting process is where the application and your supporting documents for your income and assets and other information are looked at by the automated underwriting system and by a human underwriter. When this process is complete we will receive a conditional loan approval that will tell us what additional documentation if any the underwriter needs to complete the loan. If an approval is not granted the loan may be suspended for more information that is critical to the underwriter before they can issue a conditional loan approval or it may be denied. If a loan is denied you will be given a reason for that such as your credit does not meet underwriting criteria or insufficient funds to close.
Step 7: Once the underwriting process is completed your loan documents will be prepared and sent to the escrow officer at the title company for you to sign. This generally happens at least three days prior to the scheduled close of escrow here in Arizona. When this “signing” time is scheduled you will also be given the total amount of funds that will be needed to close your transaction. This will include your down payment, closing costs, pre-paid items, and reserves. You will need to bring a certified check with you to your closing or arrange for your funds to be wired from the appropriately documented account to the title company that is handling your closings. It is very important that you follow your mortgage professionals directions regarding the account you take your money from. Everything must be documented and paper trailed regarding your funds to close.
Step 8: Once the loan documents are signed they go back to the lenders funding department. The funder reviews the documents and if all the funding conditions are met they are ready to fund the loan. This usually happens within one to two business days after you sign your documents. If something is missing or a signature is missed you may be asked for the additional information or to sign another document before the loan will fund. It is a very good idea to be available during this time between when you have signed your documents and when your transaction has closed.
Step 9: Once the loan is funded by the lender the wired funds are sent to the escrow officer’s title company. When the escrow officer receives the funds from the lender and the funds required from the borrower everything is reconciled and the final step of the closing is underway.
Step 10: The escrow officer is now ready to record the transaction. In Maricopa County Arizona this is electronically sent to the county recorder’s office. When the confirmation that the transaction is completed the escrow is closed and this is the final step in the process. You are now the owner of your new home.
Here are some very IMPORTANT notes to this process. If you pay attention to these details in the links below it will make the mortgage process much less frustrating.
If you have any questions, please feel free to give me a call. Thanks for reading!