How the Loan Process Works
The following is a description of the loan process and the time frame involved. This information will give you a better understanding of what your Mortgage Specialist is going to do for you and what he or she may need from you.
The type of loan you are applying for will determine the length of time required to complete your loan. Different loan types require different documentation. For example, if you have good credit and lots of equity in your home and you are applying for a second mortgage the lender may not require an appraisal. Your Mortgage Specialist should walk you through the process up front so you will know what to expect. Typically, most loans take 3 to 4 weeks to close.
Application:
The application process is where you fill out the application, sign various forms that authorize the lender to process your loan, and deliver your documentation requirements (bank statements, pay stubs, W2s, etc.). Obviously if you are doing this through the mail it can take a week or more but if you go into the office it usually only takes an hour or so.
Processing:
Once all of your documentation is received your Mortgage Specialist will verify and validate all of the information to be true and correct. Verification requests may be sent to your employers, mortgage holder/landlord and lending institutions. This is done by fax when possible. It is usually during this time frame that the appraisal and the title policy are ordered. When all the information is collected your Mortgage Specialist then verifies that basic lender loan requirements have been met, and the file is packaged in a manner the lender specifies. The completed package (including the appraisal and title report) is then sent to the underwriting department of the lender. The processing of your loan usually takes about a week but it is often delayed when third parties do not respond to the validation requests or appraisals are delayed.
Underwriting:
The underwriter reviews your loan package to make sure it conforms to all the guidelines required for that loan product. They also review the appraisal and title report and may do additional validation of employment, mortgage payments, and credit or anything else they feel is necessary to document your loan. They have ultimate power and decision authority over the approval of your loan. The time required to do this is driven by the volume in the market. If the market is flooded it can take up to two weeks but under normal conditions it only takes one to three days.
Conditions to Close:
When the underwriter is done reviewing your loan he or she will send "conditions to close" to your Mortgage Specialist. These are normally just requirements for further documentation to support your file. When these needs have been satisfied the underwriter will give a final approval and "clear to close".
Clear to Close:
When your Mortgage Specialist gets the clear to close he or she then schedules and coordinates with all the parties involved the time and location to sign the final documents to close the loan.
The Closing:
When everything is scheduled the lender then draws the document package and sends it to the closing company. This can be done by overnight delivery, fax, or electronically. It can take one to two days depending on the delivery method. You meet with the closing agent, sign the papers, and pick up the keys.