The mortgage loan process is about the same anywhere in the United States. Lenders, brokers and mortgage bankers are located in every town and city in the country and since mortgage loans all must follow the same federal guidelines, the only differences will show up in loan programs and individual interest rates.
A consumer or borrower looking for a mortgage loan to purchase a property or perhaps to refinance their existing property contacts a loan officer, whether it's at their favorite walk in bank if they provide mortgages, or perhaps a mortgage broker of their choice.
An initial application is taken, using a standard government approved form called a Fannie Mae application form, otherwise known as a 1003 within the industry. This application must be completely filled out in its entirety and signed by all borrowers. Disclosures must be reviewed and signed by the borrowers--this also authorizes the loan officer to check on their credit and employment status along with any other information they may need to verify in order to complete the loan process.
All borrowers must sign the application themselves, even a spouse cannot sign for the other unless a power of attorney is in place. A power of attorney allows the present borrower to sign and agree in behalf of the absent borrower.
Once the application has been completed, the loan officer may give a general idea of what he proposes to do for the borrower(s), aimed at satisfying their intentions after he has pulled and reviewed all borrowers' credit histories.
The loan officer will then analyze the debt to income ratio of the borrowers and loan to value requested along with employment history, credit and various other factors needed to determine what loan program and interest rate they may qualify for based on what programs are available by the lenders he works with.
The loan officer will then present the application to various lenders for their review, to see if any good offers come in based on the application. If you are dealing directly with a lender, they will either accept or deny your application and will not take the deal elsewhere. This is a primary reason that borrowers will use a broker. The credit should not have to be pulled again during this shopping process.
Once offers are received, the loan officer will inform the borrower so they can decide if they want to move forward with the loan or not. If the answer is yes, then the borrower must provide proof of all information on their application, such as proof of income, bank accounts, letters of explanation if needed and other pertinent documentation.
The loan officer collects all the documentation to turn into the lender's underwriting department and somewhere in the process will order an appraisal of the subject property. No lender will offer a final loan approval without a recent appraisal of the value of the property. The appraisal will typically be reviewed by another outside source to confirm it's true value. The collateral is critical to any mortgage loan since loan to value amounts must based on a true value of the property.
With all loan documentation turned over to the lender, along with the appraisal, underwriting and reviews by the lender will take place. An underwriter is assigned to the file and it's his job to verify that all the information is true, and they will certainly call and verify employment, call banks if needed to confirm account balances and anything else they feel a need to verify. This process may take weeks depending on the current work load of the lender.
The underwriter will make a decision as to whether this will be a good loan, and often times before final decision is made the loan will go before a review board within the lender's institution. Sometimes just a senior underwriter will review and sign off.
Once the loan has been approved, most people lock in their interest rate. The loan officer will do for her client. In some cases, rates may be locked in before an approval, but it can be risky, since locks expire anywhere between 15 and 60 days after locked. If by chance the loan process is not complete by then, the client may lose that lock and even pay a penalty for it and experience a higher rate.
Ultimately, the lender will provide a clear to close confirmation to the loan officer, letting them know that all loan conditions have been met and they can feel free to set up a closing date at a title insurance company. Even at this point however, the lender may still require final documents to be brought to the closing table or possibly faxed to them before the closing. A typical document would be a most recent pay check stub or bank statement.
The closing agent who represents the title company will verify the identities of the borrowers and go over all the final loan documents needed to be signed by the borrowers. Once everything is signed and any final documents approved, the lender will then wire the loan amount directly to the title company, who then has authority to create checks to be distributed to involved parties.