Home Loans,
Understanding the Home Loan Process

Loan Prequalification:

          Before you begin looking for your dream home, meet with a lender. The purpose of this meeting is to determine how much you can afford, and if you will qualify.  Often this can be done over the telephone, and it is not a firm commitment on the lender’s part.  Yet, it will give the buyer a better idea of his or her price range, and it will be a necessary piece of information to include when you are ready to make that offer. Some lenders might charge you a fee to run a credit report. 
          Be honest and open with the lender during this interview.  If you mislead your lender during this phase, and are erroneously pre-qualified due to your misinformation, your lender will eventually find out, and should your house fall out of escrow because of this, you could lose your earnest deposit.  You will also be breaking laws if you obtain a loan using false information.
          Ask your lender how long of an escrow you might need to process this loan, and relay this information to your real estate agent, before you write a contract. If you are going with an out of area lender, you may discover you need additional time, in order to obtain an appraisal.  In a very active market, appraisers may be backed up with jobs, and they may give faster service to those lenders who are regular customers, as opposed to an out of area lender, who may never again need the services of that appraiser.

Loan Application:

          You may begin the application process during prequalification or after you have found your dream house, and your offer has been accepted. Your lender will give you a list of documents they may need, (such as tax returns or copies of checking accounts).  The borrower will receive a “good faith estimate” and a “truth-in-lending” statement that itemizes the various costs of obtaining a loan.  It is your responsibility, and in your best interest, to get the information to your lender in a timely fashion.

Opening the File:

          One of the upfront fees associated with purchasing a home is an appraisal.  Often that is paid by the buyer. Appraisers in our area charge approximately $400. (This amount varies). The appraisal is to assure the lender of the house’s worth. During this period the lender will be ordering credit reports, and any necessary reports or inspections.  The borrower may also be given an additional list of documents needed by the lender.

Loan Processing:

           During this period the lender and processor will be verifying the borrower’s financial information, including debt and payment history. If there are any “issues” concerning the borrower, it will be addressed during this time, and written explanations may be necessary. The job of processing is to prepare a package for the underwriter.

Loan Underwriter:

          During the loan process it is the underwriter who evaluates the loan package, and determines if it qualifies.  The underwriter may request more information.

Loan Approval:

          When the lender is satisfied, and all conditions are met, approval is issued and title insurance is ordered.

Loan Closing:

          The lender will order the loan documents, which normally are delivered to the title company, and then to the borrower for his or her signature, (notarized) and then returned to the title company .  The title company will have papers for both the buyer and seller to sign before closing. The buyer will need to make arrangements to deposit the balance of their down-payment (which is separate from the loan amount) into escrow. Once the lender funds the loan, and the escrow company records all of the documents, the sale “closes”, and the new owner obtains title.

(The loan process may vary
from state to state.)