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Pre-qualification occurs before the loan process actually begins. The lender gathers
information about your income and debts, and makes a financial determination about how much
house you may be able to afford.
It's a good idea to know how expensive a home you can afford before you start shopping for
one! If you are refinancing the loan on your existing home, then the pre-qualification
process should help you decide whether refinancing is a good idea for you.
The application is the beginning of the loan process and either occurs after you have found
a property you want to buy or have determined that you wish to refinance the loan on your
existing home. You complete a mortgage application for a particular loan program and, supply
all of the required documentation for processing. Various fees and down payment options are
discussed at this time. The loan officer will deliver a Good Faith Estimate (GFE) and a
Truth-In-Lending Disclosure (TIL) within three days that itemize the rates and estimated
costs for obtaining the loan.
The lender will typically submit the application package to an automated underwriting system
that will provide the lender with the necessary documentation needed for loan approval. In
some cases, the lender may also manually underwrite an application package.
The lender's processor reviews the credit reports and documentation to verify your
employment, debts, and payment histories. If there are unacceptable late payments,
collections, judgments, etc., the processor requests a written explanation from you. The
processor also reviews the appraisal and survey and checks for property issues that may
affect final loan approval. The processor's job is to put together an entire application
package for the lender's underwriter.
The lender's underwriter is responsible for determining whether the application package
prepared by the processor meets all the lender's criteria. If more information is needed,
the loan is put into "suspense" and you will be contacted to supply more
If the underwriter approves the loan, the lender issues a conditional commitment to lend,
orders title insurance, works with you to clear all conditions to its commitment to lend,
and then schedules a closing time. Conditions to the lender's commitment may include issues
with credit, income, or the property that may arise during the processing and underwriting
The closing will occur after all conditions are cleared and the lender issues a full loan
approval. At the closing, the lender "funds" the loan with a cashier's check,
draft or wire to the closing agent, who disburses funds, in exchange for the title transfer
to the property. This is the point at which you finish the loan process and actually
refinance or buy the house, subject to the lender's loan. Closings occur at different places
in different states. For instance, some states require that the closing take place at a
closing attorney's office, while others use a title or escrow company. You may also be able
to close at your home.