27 Valuable Tips
for Selling Your Home

How the Loan Process Works

There are eight basic steps your loan will go through.  For the process to run smoothly, all documentation should be submitted early in the procedure, and be as complete and accurate as possible.

Step 1:  The Application - At this time, the mortgage consultant obtains all pertinent documentation so unnecessary problems and delays can be avoided.  The Realtor opens escrow with the title company at this time.

Step 2:  Ordering Documentation - The mortgage consultant requests a credit report, an appraisal on the property, verifications of employment and funds to close, mortgage or landlord ratings, a preliminary title report and any other necessary supporting documentation.

Step 3:  Awaiting Documentation - The mortgage consultant begins to receive the supporting documentation, checking for any problems that might arise and requesting any additional items needed.Step 4:  Loan SubmissionOnce all the necessary documentation is in, the loan processor submits the loan package to the lender’s underwriter for approval.

Step 5:  Loan Approval - Loan approval generally takes anywhere from 24 to 72 hours.  All parties are notified of the approval and any loan conditions that must be received before the loan can close.  The loan approval is the beginning of the closing process.Step 6:  Documents are DrawnOnce the loan approval is received, the loan documents (including the note and deed of trust) are drawn and sent to the title company.  The escrow officer calls the borrowers to come in when the papers are ready for final signature.  At this time, the borrowers are told how much money they will need to bring in to close the loan.

Step 7:  Funding - Once all parties have signed the loan documents, they are returned to the lender who reviews the package.  If all the forms have been properly executed, the funds are transferred by wire.

Step 8:  Recordation - When the title company receives the funding check from the lender, the lender’s security for the loan is made a matter of public record.  This is done by recording the note and deed of trust at the county recorder’s office.  Escrow is now officially closed.

How the Underwriter Looks at Your Loan

When your loan package is submitted, it goes directly into the hands of an underwriter whose job it is to determine your “credit worthiness” or your ability to repay the loan.  The underwriter looks at the following criteria:

• Your Employment History - A consistent history of employment in the same line of work is considered ideal.  “Job hopping” is not looked upon favorably as it may lead to unstable income.  However, there should be no problem if you have switched jobs within the same line of work for advancement.
• Your Income - The underwriter looks carefully at your “capacity” to repay the loan.  Your job stability and gross income (in relation to expenses) are critical in this regard.  Most income must be verified as having been received for at least two years to be used for qualifying purposes.
• Your Credit History - Within your credit history is an indication of your “character” or willingness to repay the loan.  The underwriter looks closely at your past payment record (your credit report) in determining this.  Any consistent patterns of late payments, collections, etc. are not looked at favorably.  Typically bankruptcy must be discharged for at least two years with reestablished credit, and the reason for the bankruptcy must be fully explained.  Good explanations for all derogatory credit will need to be obtained.  All outstanding collections, liens and judgments must be paid off through escrow.  
• Your Assets - Your assets are considered the money you have available for the down payment, closing costs, cash reserves (monies left over after close of escrow to cover two to three months of mortgage payments) and other liquid assets in your net worth or “capital.”  The underwriter wants to see your ability to save money and manage your financial affairs.  They also need to see the “source of funds” or where the money for the down payment, etc. is coming from.  Cash from under the mattress is not acceptable – it must be verified that you have had the money (or the asset) for a two to three month period.  Never move money around (pay off bills, get a gift, etc.) without first discussing the best way to do it with your Loan Consultant since it can seriously affect the underwriter’s view of your loan.
• Your Debts - The underwriter is concerned with the amount of debt you currently have as it affects your qualification and your ability to repay the loan.  Any excessive use of credit is not looked upon favorably.
• The Property - Because the property is the lender’s “collateral” for the loan, the value, marketability and condition of the property is extremely important.  The underwriter looks at the appraisal for the information.