Step One.

Application: (begins 1-5 days after purchase agreement is signed).

The borrower meets with the lender and completes a mortgage loan application.  At the time of completion of the application, the borrower must supply:
Names and addresses for past and current employers within the last 2 years. 
Names, addresses, and account numbers for all financial institutions to which the borrower is indebted, in order to verify installment and revolving debt, as well as asset verification.

-Addresses of residency for the past 2 years.
-An offer to purchase.

Within 3 days of completing the application, the lender will send various mortgage disclosures including a Truth-in-Lending disclosure.  This disclosure will itemize the approximate costs associated with applying for the loan.

 

Step 2:

Opening the file: (begins 2-10 days after purchase agreement is signed).

The lender will order a property
appraisal and a credit report. The lender will also send out Verifications of Employment (VOE) and Deposit (VOD) and possibly a verification of rent (VOR) or verification of mortgage (VOM) and wait for them to return.

The past and present employers submitted by the borrower Verification of Employment (VOE) are called upon to verify the past 2 years of employment history, gross income, as well as verify the probability of continuing employment. Verifications of employment (VOE) are also used to verify the amount of variable pay such as commissions, bonuses, and overtime and to assess the likelihood of continuance. Click here to see a VOE!

 

Verification of Deposit (VOD):  The borrower is required to have at least 3%-5% of his or her own funds for the down payment, sufficient funds to close the loan, and 2 or more months’ cash reserves of principal, interest, taxes, and insurance (PITI).  All funds must have been on deposit for 60-90 days.  Therefore, the borrower’s financial institutions are called upon to verify the required existence of each borrower’s funds. Click here to view a Verification of Deposit (VOD) form.

The lender is also required to request information of the existence of gift funds.  If any were received, the lender must verify the funds were received from a donor and passed on to the borrower (typically via deposit slips).  A copy of the gift letter must be filed.    

 

Step 3:

Processing: (begins 3-25 days after purchase agreement is signed).

The loan processor verifies that the VOEs and VODs have been returned and reviews the credit report, borrower’s debt, and past payment histories.  Sometimes a verification of mortgage is required if all mortgage payments are not reported on the credit report.  Click here to see a sample VOM.
If any late payments, collections, judgments, or any other adverse information is listed on the credit report, the borrower is required to complete a written explanation.

The appraisal is also reviewed for any property issues or discrepancies where additional information may be required from the appraiser.  Any agreed upon or required repairs on the property will be reported to the real estate agent, the borrower, and the seller.     

 

Step 4:

Lender underwriting: (begins 5-25 days after purchase agreement is signed).

The underwriter reviews the loan package in its entirety to determine whether to approve the loan. Often, more information is needed to make the decision. If more information is required, the loan is put on hold until the underwriter receives the requested information. It is normally referred to as underwriting conditions or stipulations (stips).

It is important to stress to the borrower that if and when more information is requested, the borrower should respond immediately. If the borrower delays, the interest rate lock could expire.

 

Step 5:

Mortgage Insurance Underwriting: (begins 7-27 days after purchase agreement is signed).

If the borrower has less than a 20% down payment, mortgage insurance is required.  Usually, the lenders will submit the loan package to a mortgage guaranty insurer at the same time the lender is underwriting the loan.

An underwriter at the mortgage insurance company will review the loan package. If approved, the loan will go back to the closing department of the lending institution for closing.  Typically, loans are approved within 24-48 hours after receipt.  If more information is necessary, the loan is put on hold until the requested information is received from the lender.

 

Step 6:

Pre-closing: (begins 7-27 days after purchase agreement is signed). 

 

The closing will be scheduled only after:  

-Loan has been approved;
-Title insurance is ordered;
-And all approval contingencies are met.

 

Step 7:

Closing: (begins 10-35 days after purchase agreement is signed).

 

Once the closing has been scheduled, the borrower must obtain homeowner’s insurance.  At closing, the borrower presents a certified check to pay for the down payment and all closing costs.  The loan closes, the funds are disbursed, and the borrower completes the purchase of a new home!