Here’s the bad news. Due to ever increasing Federal Regulations (resulting from the credit crisis), getting your mortgage closed is more complicated than ever.
Here’s the good news. A good lender will help you through it. I’m not talking about one of those online lenders or mega banks with a massive mortgage call centers and a “we’ll get to it when we get to it” attitudes. Find a local Boise lender… someone you can call directly… someone you can drop in on… someone who will toss and turn and lose sleep if things don’t go perfectly. There are people out there who know that it’s not about the mortgage… it’s about your life and your dreams. Those are the mortgage folks that will help you.
Now, here’s the low-down. Getting a mortgage closed involves LOTS and LOTS of people. There are buyers, sellers, realtors, builders, inspectors, appraisers, title companies, escrow agents, a loan officer, a loan processor, and a loan underwriter, credit bureaus, employers, banks, accountants, attorneys, insurance companies and too many government people to even count. I think you get the idea… lots of moving parts.
Here is the process that has to happen so that you can enjoy your new home (if you are purchasing) or your wonderful new loan terms (if you are refinancing). AND, you’ll be happy to see that there are a lot of things you can do to make the process happen quicker and easier.
Part 1: Pre-approval. Your pre-approval is done by an automated underwriting system. That’s fancy mortgage speak for a computer program that analyzes the information you provide in your loan application and gives us a preliminary yes, no, or maybe. If the computer says ”yes” to your loan application it’s known as pre-approval. Your Pre-approval is only as good as the documentation you can provide that supports the information in your loan application. Here are some things you can do to make the process go smoother:
What YOU should do BEFORE you find a property:
- Provide any documents requested quickly and up front. The more thorough you are up front the less likely your lender will discover problems later in the game.
- Read my other post, “Don’t Jeopardize Your Loan Approval”
What YOU should do quickly AFTER you find a property (and have a contract to purchase):
- Sign and return the loan paperwork and disclosures the lender provides to you right away.
- Let your lender know once your home inspection comes back OK.
- Send your lender authorization and payment to order the appraisal within 24 hours.
- Call your lender to lock your rate (they can fluctuate frequently).
- Arrange for home owner’s insurance and send your lender the name and phone number of your agent.
- Re-read “Don’t Jeopardize Your Loan Approval”
- Send your lender updated employment, income, asset, credit documents as requestet including documented cash to close. Be sure to include a copy of your cancelled earnest money check.
It’s important to do your part quickly, because after you have provided everything the lender needs, they have a long list of things to do (this is called “processing” your application) including:
- Order and receive your title insurance commitment
- Order and receive your home owners insurance
- Order and receive a verification of your employment
- Order and receive tax transcripts from the IRS (fraud prevention)
- Order and receive a verification of your bank accounts
- Order and receive a certification indicating whether your property is in a flood zone.
- Order and receive validation of the tax returns you’ve filed.
- Order and receive an appraisal
- Order and receive validation of your social security number
- Make sure parties involved in the transaction are not on the government “black lists” of prohibited parties.
- Check your name against a government list of defaulted government debt that would make you ineligible for certain loan programs.
- Order special verifications on VA loans.
- Order and receive supplements to your credit report for inaccurate or missing information. Verify your addresses, AKAs, and obtain letters of explanation as needed.
- Try to be psychic and obtain any other random documentation the underwriter might ask for.
- Upon completion of all of the above, we submit your file for formal underwriting.
Part 2: Formal Underwriting. After your file has been processed, it goes to the formal underwriting stage. This part is done by a real live human underwriter. Your underwriter is the person who analyzes your loan application (and all of the information gathered by the processing team) and tries to predict whether you will repay the loan you are requesting. Her job is part science and part psychic… and she has the discretion to exercise both. On very rare occasions, the human underwriter will override the computer approval if your documentation does not support your loan application or if she sees additional risk that the computer was unable to analyze. She will also make sure the property meets the loan guidelines since it is the collateral for the loan. And finally she will check to make sure your loan meets all of the federal regulations pertaining to mortgages (and there are lots of them!).
After analyzing the whole file, the underwriter may ask for follow up information, known as “conditions.”. My best advice is to get these items to her zippy quick to keep the process moving forward.
Part 3: Loan Closing: Once the underwriter has “signed off” on all of the loan approval “conditions” she will issue a “clear to close” notice. At this point, there are a few more steps before your transaction will actually close (but you’re definitely in the home stretch). Here are the final steps:
- Quality Control: Federal Regulations requires the mortgage lender to do a last minute credit check and verification of employment to confirm no changes that would negatively impact the loan.
- Your closing documents are prepared by either an attorney or a “document prep” company & sent to the escrow closing agent.
- Your escrow closing agent prepares a HUD-1 closing statement outlining the funds involved with the transaction and returns it to the mortgage lender for approval.
- Upon approval of the HUD-1 closing statement, buyers and sellers sign closing documents.
- Signed closing documents are returned to the mortgage lender for approval.
- The mortgage lender wires funds to the closing company and gives their approval to record the necessary documents with the County.
- The escrow closing agent, records the required documents with the county
- The escrow closing agent disburses money to the applicable parties involved with the transaction.
- If purchasing, you are given keys to your new home. If refinancing your old mortgage is paid off and the new terms are in place.
Remember the good news. A good lender will help you through it. I’m not talking about one of those online lenders or mega banks with a massive mortgage call centers and a “we’ll get to it when we get to it” attitudes. Find a local Boise lender… someone you can call directly… someone you can drop in on… someone who will toss and turn and lose sleep if things don’t go perfectly (because they know they might run into at the Saturday morning farmer’s market). There are local mortgage folks out there who know that it’s not about the mortgage… it’s about your life and your dreams. Those are the mortgage folks that will help you close easier, faster and happier.