The loan process can seem daunting these days for potential buyers, what with the myriad of regulations and conditions required by underwriters.
Often times, this process can be simplified and streamlined when you have a good broker/lender to work with that will explain everything up front, educate you on the different forms and why they are necessary, and lastly troubleshoot from the beginning so as to mitigate any issues down the line.
Following this basic framework will allow any buyer to feel much more comfortable with the overall loan process and enable a smooth escrow and a closing at 30 days or less.
Apply for a loan
The following are the basic items needed to apply for a home mortgage loan. These items can be further broken down into sub-sections.
Income docs, asset statements, full loan application detailing employment history, Identification cards, Social Security Cards, statements for any other properties owned, divorce docs or court orders for child support and any other pertinent documentation needed.
Income: Most recent two years personal federal tax returns. Corporate returns are required if borrower owns any business. Two years W2’s Recent month pay stubs Written verification of employment and income from Human Resources at the buyers’ employer
Assets: Bank statements, 401k, Money market, Stocks, Bonds, IRA, or any other liquid asset accounts
Others: If there are any other properties owned, need the mortgage statements, property tax bills, insurance statements and HOA statement (if applicable).
Once all these docs are gathered and submitted to the broker/lender; the loan officer will obtain a full credit report and review the past credit history.
Once that is complete, all the information gleaned from the submitted documents will be reflected in the loan application and a full automated loan decision can be rendered.
Once an approval is issued, the buyer will know full well how much they can qualify for and secure the financing needed to purchase a property. At that point it is happy hunting for the prospective home buyer!
The credit decision - final approval
When a borrower is officially in escrow with a fully executed contract, the full loan file will be presented to the underwriter to review and write up any conditions.
Majority of the time; a loan approval is issued with conditions that must be satisfied prior to final approval.
Once all conditions of the loan approval, including the appraisal which verifies the collateral, are satisfied or “signed off”; then the underwriter will issue a final approval.
This final approval is the equivalent of a clear to close and means that the borrower no longer has any impediment to closing.
This signifies the final step before signing full loan documents including the deed and promissory note and consummating the transaction with an attorney or notary.
Once completed the transaction is deemed to be closed.
Funding your loan
In California, unlike some other states, the closing of the loan and real estate transaction is done when the loan is funded which occurs a couple days after the loan documents are signed.
In other states, the loan is funded and closed at the signing table; however, California has its own rules and therefore the fully executed loan docs are sent back to the lender for review prior to funding of the loan.
This process can take 1-5 days and certain funding conditions must be met.
Once all funding conditions are satisfied the loan funder will order the wire and have it sent to the title company to record the title in the buyers name and then to escrow to disburse funds to the appropriate parties.
At this point, the transaction is deemed to be closed.
The mortgage process
The mortgage process today is unlike it has ever been. It is imperative to have a trusted and seasoned loan officer guide you through the process from A to Z.
The most important transaction of your life should be handled by a knowledgeable and trust worthy professional. Cheers to Closing!