What Are the Most Important Steps in the Mortgage Loan Processing?
Mortgage loan origination is the lengthy process that every borrower needs to go through to have their mortgage loan approved. Learn the Most Important Steps in Getting a Mortgage and be prepared for the lenders extensive checklist to include; document verification, credit history check, a review of the borrower’s financials, property appraisal, and more. The process is exhaustive and goes into great depth. This is because lenders are funding large sums of money that go into hundreds of thousands of dollars for every approved loan.
Lenders need to do everything that they can to ensure that they do not fund the borrower with a loan amount that is greater than that of the property. This is why a borrower needs to go through a series of steps that leave no room for doubt in the minds of lenders.
Every lender has a unique approach to the mortgage loan origination process. To avoid the frantic sale of the property upon foreclosure; the mortgage loan approval process is both meticulous and exhaustive. It comprises of interdependent steps that comprise of documents, property, and borrower assessment steps.
Breaking Down the Loan Approval Process
The standard mortgage loan approval process is made up of the following steps. Each one of these steps contains tasks that may change according to the organizational goals and culture of a lender:
1. Pre-Approval: While some lenders do not consider it a part of their loan approval process, it is the pre-approval step that gives lenders an introduction to the borrower. They are asked to submit their personal and financial documents for a preliminary review. It is through this process that borrowers get an idea of the loan amount they would receive from the lender should the loan be approved.
2. Loan Application: The borrower review’s the possibilities of choosing a lender based on the pre-approval they receive from the lender. Upon choosing the lender, they are required to fill out an application forms, submitting their details in the process.
3. Loan Processing: Loan processors review all borrower documents. This is an in-depth process that reviews details such as employment history, income sources, job stability, creditworthiness, and outstanding debts. Following the review process, the loan processor pushes the file to appraisal.
4. Property Appraisal: In this step, the loan processor calls for a certified property appraiser to evaluate the market value of the home. Factors such as the geographical location, value of similar properties in the region, and the physical condition determine the value. The property appraisal step is paramount to determining the final approved loan amount.
5. Loan Underwriting: The final decision is to approve the loan lies in the hands of an underwriter. The underwriter is a certified authority who evaluates the level of risk associated with approving the loan. After a careful review of the creditworthiness of the borrower, the underwriter finalizes the loan amount that is deemed suitable for the borrower.
6. Loan Closing: Upon receiving approval from the underwriter, the closing processes are initiated. Disclaimers, payment schedules, and the details of the approved loan amount are documented and sent to the borrower. Signatures of the borrower are taken, binding them to the terms and conditions of the loan, and they are given a loan repayment schedule.
As lenders try and streamline their process to become more efficient they have been leaning on third-Party mortgage loan processing companies. These specialists are proficient at allocating the required amount of resources to streamline the loan approval process for the lender. The work of such business organizations brings a competitive and strategic advantage to lenders, increasing the profitability of their business and making the process easier on the borrower.