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The mortgage process

Application | Ordering documents for the loan file | Underwriting | Preclosing | Closing

Asset verifications. Credit reports. Insurance applications. Many homebuyers wonder where the loan process begins – and where it ends.

To help make the process easy to understand, we've laid out the basic steps involved in purchasing a home. The time frame will vary depending on geographic location, the loan, you and your lending institution.

Application

You've decided on a loan program, and now you're ready to complete a loan application with the help of your lender.

In order to expedite the application process, your lender may give you a list of documents to bring with you. If you have already met with a lender to prequalify for financing, you may have given them some of this information. Even so, bring the documents with you again when you go back to apply for your mortgage.

Once you have completed the loan application, the lender will verify, or confirm, all of the information you provide. Based on the requirements of your loan program, the lender may ask you for additional information.

Shortly after you apply for your loan, you will receive these documents from your lender:

Loan Estimate (LE)
The Loan Estimate is the lender's best estimate of your closing costs. It shows an estimate of the amount of any fees your lender may charge to process or close your loan, such as mortgage insurance, title insurance and recording fees.

It also provides a summary of how your loan will be repaid and itemizes the costs associated with applying for a loan. The Loan Estimate indicates the finance charge, annual percentage rate (APR), number of payments you will make, amount of each payment (for fixed-rate loans), late payment charges that may apply and total amount you will pay in principal and finance charges over the life of the loan. The information in the Loan Estimate Comparison section will help you to compare the cost of different loan offers. To compare the costs, you want to be sure you are comparing the same kind of loan.
Commitment Letter
Your lender will send you a Commitment Letter, which is a promise from the lender to make you a loan. It includes all of the specifics of the loan as well as any conditions that must be met prior to or at the closing, and information on the loan amount, term, origination fee and interest rate.

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Ordering documents for the loan file

Your lender orders the following documents and then awaits their return:

Property appraisal
The property appraisal is ordered to estimate the property's market value. The maximum loan amount the lender will provide will be based on the lower of the purchase price or appraised value.
Credit report
If you do not have traditional forms of credit, you will need to provide other evidence of your ability and willingness to repay debts, such as money order receipts or cancelled checks from the payment of rent and utility bills.

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Underwriting

Your lender creates a loan file with all required information and passes that file on to an underwriter.

The underwriter makes sure all loan requirements are met. Sometimes an underwriter needs additional information to make a decision. Two typical scenarios your lender might present to you are:

  • Information is needed before the loan is approved. It is critical that you provide the additional information as quickly as possible in this situation.
  • The underwriter approves the loan "with conditions." That means you will need to provide additional information at closing before the loan can become final.

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Preclosing

Once the loan is approved:

  • Title insurance is ordered
  • Approval contingencies are met
  • The closing is scheduled

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Closing

Once the closing is scheduled, the borrower orders homeowners insurance, which covers for damages or losses caused by things like theft, fire, vandalism or wind. Because your property is the security for your mortgage loan, your lender wants to be sure the value of the home is protected in case it is damaged or destroyed. Contact your insurance agent to secure an insurance binder.

At the closing, the borrower obtains his or her loan proceeds and presents a certified check to cover the balance of the down payment and the closing costs. The loan closes. The borrower moves into the new home.

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