It is very uncommon for loan professionals to be unfamiliar with the processing details of a mortgage transaction due to their heavy workloads. One of the following may be to blame: the company in question does not permit originators to process; the loan officer is too busy to deal with the applicant’s file after the application has been submitted; or the loan officer does not have the time to learn. In any event, the mortgage application process is straightforward. Let’s break it down into its parts.
When a borrower accepts a mortgage offer, the lender’s responsibilities in the loan’s origination phase mainly conclude. The loan officer has finished “selling” the loan, collecting the necessary signatures on loan disclosures, and collecting the preliminary documentation of the borrower’s income and assets. The loan file is usually transferred to a processor at this point. From here on out, the process is easy and uncomplicated.
First, get computerized approval. After the application has been checked for errors, it will be uploaded to an underwriting system, maybe one run by Fannie Mae or Freddie Mac. When mortgage brokers handle the loan application process, they may use the bank’s interface or the wholesale lender’s system. The procedure is simple and easy to follow.
The automated approval system reads the loan application once exported from the loan origination program. After saving the file, you can upload it to the lender’s website by following the instructions. A credit report can usually be reissued or reordered after a loan has been uploaded to a lender’s system. Before submitting the file for automatic approval, ensure you’ve followed the steps for re-issuing or re-ordering a new report. If the loan is pre-approved by the computerized underwriter, it will also create the paperwork that must be included to receive final approval.
The Second Step: Get an Evaluation — Ordering an appraisal is the next step in determining how much the property is worth. The loan origination program will have a form to fill out to request an estimate. The homeowner can then send this to the appraiser, who will set up a meeting with them to inspect the property. For a purchase, the appraisal request should be accompanied by a full copy of the purchase contract for the property. You can contact the appraiser and inquire about what information is needed to schedule an appraisal if you aren’t utilizing loan origination software that contains an appraisal request form.
Third, upload your files. Send your loan package to the wholesale lender or underwriting office for review. The exact procedures for submitting this data vary amongst establishments. If you work in a bank, correspondent bank, or mortgage banking office, you may take the files down to the underwriting department; if you work in a brokerage, you may need to fax or electronically upload your loan package. If you need a loan, the lender will tell you how to apply for one, and you should follow their instructions. These rules will also cover the minimal amount of required paperwork and whether or not the lender has a preferred stacking order.
The Fourth Step: Have Title and Insurance Documents Ordered — Get property/hazard insurance now if your lender didn’t demand it when you first applied for the loan. The insurance declaration page is all that is required from the borrower. Ask the borrower for the contact information of the insurance agency if the declaration page is unavailable. Once you have this data, you should formally request the new insurance coverage by email or fax. The loan application program also includes this form of document request. Make sure to specify the mortgagee/loss payee clause, loan number, and loan amount for the funding lender. You can access the mortgagee clause by visiting the lender’s website, dialing the lender’s toll-free number, or contacting your designated account executive.
After the appraisal, proof of hazard insurance is usually obtained if the handled loan is a purchase transaction. Many insurance providers will not issue a policy until they have reviewed the assessment for particular property attributes and documented the replacement cost.
A preliminary title report on the property in question should also be ordered. Obtaining the necessary evidence of hazard insurance is as easy as placing an order. The standard request form can be found in most loan origination systems. Fill out the form entirely or as much as you can. Send an electronic message or fax to the title business. You should also tell the title company handling your refinancing to arrange for any necessary payoffs of existing mortgages on the property. When seeking profits from the title firm, provide the loan number, phone number, and a completed authorization to release information form.
Step 5: Meet Loan Requirements The mortgage underwriter may ask for further documentation once the loan has been conditionally approved and underwriting is complete. The borrower may need to provide supporting documentation, such as an explanation letter explaining their financial situation. Income, assets, and previous addresses could all be expanded upon. If the borrower is missing anything, gather it before resubmitting the loan terms. Contact the underwriter for more information if you have any questions about the loan’s terms.
Sixth, Get the Loan Paperwork Ordered — Once the final loan requirement has been met, the closing documents can be sent to the title or escrow business. The “doc order” procedures of various lending banks have varying requirements. Document requests are typically submitted in one of two ways: online through the lender’s website or by fax or email. Borrower and property details, as well as rate and title/escrow firm and fee information, are included in the request. For appropriate drawing of the loan documents, this paper or electronic form must be filled out in its entirety and with precision.
Funding — The Seventh Step The loan documents will be returned to the lender for inspection after they have been signed by the borrowers and received by the title/escrow business. The lender will notify the loan officer (presuming it is the loan officer processing) or the title firm if anything is outstanding before funding the loan. Quickly meet the requirements for the additional money.
This is the bare bones of a standard mortgage application. Additional steps for processing government loans will be discussed in a subsequent piece.
It’s Matt Madlang, of course!
I am the president of [http://www.beatmybroker.com], the premier online resource for locating every state’s most competitive mortgage rates.