Learning Center > Closing the Deal > The Loan Process

The Loan Process

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Step 1. The Application The key to a smooth loan process is the initial application interview. At this time, the loan officer obtains all pertinent information and documentation so that unnecessary problems and delays may be avoided. This is the time to discuss which loan programs are best suited to meet the buyer’s needs. Step 2. Automated Underwriting After the application is completed; the loan officer inputs the application into an automatic underwriting system. This is an automated financial evaluation program that analyzes the borrower’s loan application data, such as income, credit history, debts, property details, debt-to-income rations, etc. This process evaluates the borrower’s financial picture and makes a credit decision. In conjunction with this review, the loan officer requests a credit report on the borrower(s). Step 3. Requesting Documentation After receiving the initial lending decision, the loan officer requests documents, such as bank statements, W2's (2 years), verification of funds, landlord details and other supporting documentation. Step 4. Loan Submission Once all necessary documentation has been acquired, the loan officer puts the loan package together and submits it to the underwriter for final approval. The final loan package includes the Agreement of Sale, the property appraisal, title commitment and any conditions that were identified in the automated underwriting process. Step 5. Loan Approval The underwriter reviews the Agreement of Sale, property appraisal and title commitment and validates the conditions from the automated underwriting process. Assuming all criteria are met, the loan is approved and/or other conditions may be requested as conditions of funding. Step 6. Rate Lock The loan officer will discuss the loan programs available to the buyer in conjunction with a review of the final loan approval and conditions. The buyer makes final loan program and rate lock decisions. Step 7. Loan Documents Preparation After the loan is approved, the loan package is completed and forwarded to the buyer’s title company, in preparation for settlement. The loan instructions include a listing of all loan charges, which allows the title company to inform the buyer of the amount of certified funds they will need to bring to settlement. Step 8. Funding The loan funds are transferred to the buyer’s title company prior to settlement. At settlement, the buyer delivers a cashier’s check for the required funds, payable to the title company (personal checks are not acceptable), and other documents required by the lender, e.g., evidence of homeowners insurance. Step 9. Settlement Seller and buyer attend a “live” settlement, during which the buyer signs all loan documents, and the Parties then consummate the sale and purchase of the property. Existing mortgage loans, utility bills broker fees, recording fees, title insurance premiums and all other outstanding charges affecting the property are paid. The net proceeds of sale are paid to the seller. Step 10. Recordation Upon completion of settlement, the title company makes the lender’s security for the loan (the mortgage) a matter of public record, by recording the deed (from seller to buyer) and the mortgage (from buyer to lender) at the office of the County Recorder of Deeds.