Pre-qualification occurs before the loan process actually begins. You can submit your information either by telephone or online. Be ready to provide your legal name, social security number, address, date of birth, employment, income and assets. You may be required to submit partial written documentation at this time. A tri-merge credit report will be ordered. Your information will be submitted through an automated underwriting system to obtain a credit decision. Various fees and down payment options are discussed at this time. This process will determination about how much house you may be able to afford.
It's a good idea to know how expensive a home you can afford before you start shopping for one! If you are refinancing the loan on your existing home, then the pre-qualification process should help you decide whether refinancing is a good idea for you.
The application is the beginning of the loan process and either occurs after you have found a property you want to buy or have determined that you wish to refinance the loan on your existing home. You will supply the remaining written documentation for processing at this time. The loan officer will deliver a Loan Estimate (LE) within three days that itemize the rates and estimated costs for obtaining the loan.
The loan officer will typically submit the application package to an automated underwriting system that will provide the lender with the necessary documentation needed for loan approval. In some cases, the lender may also manually underwrite an application package.
The lender's processor reviews the credit reports and documentation to verify your employment, debts, and payment histories. If there are unacceptable late payments, collections, judgments, etc., the processor requests a written explanation from you. The processor also reviews the appraisal and title work and checks for property issues that may affect final loan approval. The processor's job is to put together an entire application package for the lender's underwriter.
The lender's underwriter is responsible for determining whether the application package prepared by the processor meets all the lender's criteria. If more information is needed, the loan is put into "suspense" and you will be contacted to supply more documentation.
If the underwriter approves the loan, the lender issues a conditional commitment to lend, orders title insurance, works with you to clear all conditions to its commitment to lend, and then schedules a closing time. Conditions to the lender's commitment may include issues with credit, income, or the property that may arise during the processing and underwriting process.
The closing will occur after all conditions are cleared and the lender issues a full loan approval. You will be provided a closing disclosure (CD) within three business days of the closing date. This document will disclose the final numbers for closing including cash needed to close, if required. At the closing, the lender "funds" the loan with a wire to the closing agent, who disburses funds, in exchange for the title transfer to the property. This is the point at which you finish the loan process and actually refinance or buy the house, subject to the lender's loan. Closings usually occurs at the closing attorney's office.