Mortgage Basics - Navigation the Mortgage Process
Each Loan is Similar,
Yet Unique – Parts I and II
by Julie Garton-Good
You've applied for a mortgage and it seems like it's taking forever. Then it hits you - how long should it take, what should you expect and when should you expect it?
Don't panic - there's help. You may be surprised to learn that lenders don't mind explaining the mortgage process more than once. Most agree that a knowledgeable consumer is a more effective team player and helps bring the loan to a smooth, mutually successful closing. And while the mortgage process (as we'll outline) varies only slightly in its major components, each borrower's situation is unique.
The five major parts of the mortgage process (in typical sequence) are application, processing, underwriting, closing documents prepared by the lender, and loan closing with you, the consumer. The major components (and the length of time each takes to complete) are impacted by the loan type, the lender's requirements as well as the strength of the borrower.
The initial step, the loan application, takes between one and two hours. The borrower meets with the lender and provides information about income, debts, assets, facts about the property you're interested in and any purchase and sales agreement signed. The loan program is selected, you'll discuss the pros and cons of locking in the interest rate (with the lender writing the lock-option agreement, if applicable to lock in the interest rate).
You'll then review and sign the loan application agreement. With many lenders using desktop underwriting to input and process your information via a computer program and access your credit report online, this is often done at your initial meeting, if not before (i.e. at the time of pre-qualification.) And since borrowers are applying online for mortgages, much of this phase (and the others to follow) are expedited by phone, fax, and email.
The second step is processing the loan. Verifications regarding your employment, your bank deposits (especially the funds used to close the loan) as well as information about your rental payment history or previous mortgage payment history are secured.
During this phase, the appraisal and the title report are ordered and all information placed in your loan file. Depending on the amount of technology employed by the lender, the type of loan as well as how quickly employers and appraisers respond, this phase can take from a few days to two or more weeks.
In Part II of this article to follow, we'll cover steps three through five to help you safely and successfully navigate to the closing table!
As noted in Part I of this article, the first two systematic steps in obtaining a mortgage focus primarily on your personal and financial information as well as verifying your employment and funds on deposit.
But steps three through five are a bit more mysterious to most buyers in part because they're typically handled by other players behind the scenes.
Perhaps most understood in loan processing is step three, mortgage underwriting. The underwriter uses the information in the borrower's file and applies it to the guidelines for the type and size of loan requested to determine the risk involved in making the loan. If the borrower is marginally qualified, the underwriter might look for tools like private mortgage insurance, a larger down payment or other compensating factors in order to approve, instead of reject, the loan. Although the average timeframe for this phase is approximately forty-eight hours, online lending and technology will soon make most decisions instantaneous.
Step four also takes approximately forty-eight hours on an average. That's when the lender draws up the loan package and closing instructions and hands them off to the closing agent.
Finally, you're closing the loan.
Depending on the state where the property is located as well as the type of lender you're using, the closing agent can be a title company, escrow company, attorney, or even a real estate agent. The closing agent reviews the closing instructions, obtains signatures from the parties, records documents, and releases funds. Although it takes only thirty minutes to an hour with the borrower, the turnaround time for the closing agent is approximately forty-eight hours on the average.
As you can see, we've lined out the process and given average timeframes. But when glitches occur (as they often do) like additional requests for documentation and appraisers who fall behind, days and weeks are added to the process. That's why even though the loan process is similar for most borrowers, each experience is unique depending on the number of roadblocks, people problems, or the lack thereof along the way!
If you're in midstream mortgage navigation, call your lender periodically to ask:
1. where is the loan in the process?
2. what can I do (if anything) to help move things along?
Let the lender know you're a team player and ready to contribute to a successful closing --- ASAP!