Whether it is the purchase of a new home for the first time or if you are the veteran home buyer, it is your goal to get through the mortgage loan process easily while still getting the best deal out there. In order to do so, it is of the utmost importance that you understand the steps that are involved throughout the process. The better you understand the process, the less problems you will incur and the easier it will be for you. The time frame from start to finish will vary depending upon the loan type, the borrower’s history, any contingencies in the contract and the investor involved with the underwriting. The complete mortgage process takes about 21-45 days.

Pre-Purchase 
(Occurs before the loan process begins)

Before one begins shopping for a home, you should have a fairly solid idea of how large of a loan you will qualify for—i.e. how much you can borrow. The first step, therefore, is known as pre-qualifying.

It is essential to explore and discover exactly what are your needs. Are you on a fixed budget, for example, and only want a $600 a month payment? Are you looking for programs that will enable you to build up equity quickly? Or, are you looking to get the most home for your financial and credit situation?

Once this is established, the agent and buyer begin searching for a suitable home. Once found, the agent negotiates a contract on the home and you move to the next step—the application process.

Step 1. The Application 
(Occurs between days 1 and 5)

The buyer (now called “borrower”) completes a mortgage loan application with me. We sit down and begin the foundation of your loan file. Within three days of application, the borrower receives a Truth-in-Lending disclosure and a Good Faith Estimate which itemizes the approximate costs associated with applying for a loan.

Step 2. Opening the File 
(Occurs between 3 and 5 days)

Assembling the loan package with all of the required documents is the most time-consuming step throughout the mortgage loan process. All of the information provided on the application must be verified and supported by documentation.

Once the file is turned in, my loan processor orders a property appraisal and a credit report, mails out Verifications of Employment and Deposit (VOEs and VODs), order the preliminary title work and gather/prepare the other documents that will be necessary to complete the loan package.

VOE: Employers are asked to verify for each borrower the last two years of employment history and gross income, and state the probability of continued employment.

VOD: Financial institutions are asked to verify the existence of each borrower’s funds. Typically, the borrower must have at least 3%-5% of his/her own funds for the down payment, sufficient funds to pay for closing costs, and 2 months’ cash reserves of the principal, interest, taxes, insurance (PITI) payment. All funds must have been on deposit, usually, for 90 days.

Step 3. Processing 
(Occurs between days 5 and 25)

The processor reviews the credit report and verifies the borrower’s debt and payment histories as VOEs and VODs are returned. If there are any late payments, collections or judgments shown on the credit report, a written explanation is required from the borrower. Also, the processor reviews the appraisal and checks to see if there are any property issues that may require additional comment by the appraiser. Finally, the processor packages the loan in a pre-determined order and sends it off for underwriting approval.

It is vital that when you are asked to provide a document, you do so as quickly as possible. Failure to do so often leads to delays and having to push closings beyond the contractual date.

During this step, it is their chief responsibility to “pre-underwrite” the file. Pre-underwriting is a proactive step where they not only shuffle the paperwork but examine the file as an underwriter would in order to ensure the success of a file when it is submitted for approval.

Step 4. Underwriting 
(Occurs between days 15 and 25)

The approval process is known as underwriting. Throughout this process, three things must be established before an approval is given:

1) the borrower’s ability to repay the mortgage loan

2) the borrower’s willingness to repay the loan

3) sufficient collateral (i.e. the property) to secure against the loan

This is typically established by looking at the past two year’s of the client’s lives (residency information, employment history and credit history) in addition to looking in the foreseeable future.

It is important to remember that the approval or denial of a file is usually determined by someone who has never met the borrower. The decision is made based upon the information and documentation in the file.

Step 5. Mortgage Insurance Underwriting 
(Occurs between days 15 and 27)

If the borrower is putting less than 20% down on the home he/she is purchasing, the loan must be submitted to a private mortgage insurance company. The mortgage insurance underwriter reviews the file much like the aforementioned step. If approved, the okay is given to proceed to the next step. However, if more information is required to make an underwriting decision, the loan is put into suspense and additional information is requested from the borrower.

Step 6. Pre-Closing 
(Occurs between days 16 and 27)

Once the loan is approved, any and all approval contingencies must be met. In addition, the rate is locked (if not done so by now) and the closing documents are ordered and sent to the title/escrow company. Finally, the closing is re-affirmed between the borrower and the title/escrow company.

Step 7. Closing 
(Occurs between days 21 and 45)