A Borrower’s Guide to the Mortgage Loan Process

For many people borrowing money for their next home, the mortgage process can seem like anything but straight forward and easy to understand. Some people feel powerless while their credit history, employment status, and financial standing is scrutinized by banking institutions to determine if a mortgage loan will be granted or not. What really happens behind the scenes of the mortgage approval process is actually something that borrower’s should not be wary about. Once people understand the risk that is involved with lending hundreds of thousands of dollars, the while process can seem very forgiving. So what happens after you complete a loan application with your bank or mortgage brokerage?

After you take an application, the loan officer will consult with you about what type of loan program is right for your situation. Once that loan program is determined, more often than not, the application is uploaded to an electronic approval system that compares the items in your application to qualifying criteria that the loan you have chosen requires. If you meet the standards for the loan approval by showing an acceptable debt to income ratio, down payment, assets, etc., an automated pre-approval is generated. Assuming you have abided by all laws, and provided a truthful application, all you need to is provide the information the loan system or lender requires. These might include:


Tax Returns

Pay Stubs

Bank Statements

In the case of a home purchase, you will need to provide a fully executed purchase contract and with almost all loans, an appraisal of the subject property. Once the above items have been collected, your application along with applicable loan disclosures are submitted to an underwriting department. A preliminary title report of the property will be ordered and proof of property insurance is required to be submitted as well.

Underwriting can take as little as a day and as long as a couple weeks. This is where people get nervous. What could possibly be taking so long? Well, it might be suspenseful, but the fact of the matter is that there are several other people trying to get home financing as well. You just need to wait in line with the rest of them. Once your loan file gets into the hands of an underwriter, it’s typically no more than a few hours before your file is out of their hands and a conditional loan approval is granted. Of course, your file could be suspended or denied, but we’ll assume all is well for this guide.

Once the conditional loan approval is granted, you now have to provide more documentation that the underwriter needs to grant a final approval. The might want more items like an updated pay stub, a letter of explanation for something on your credit report, a written verification of employment from your employer, etc. Once again, when you provide this documentation and submit it to your loan officer, it might take another day or more for the underwriter to review the items. This again adds to the length of time it takes for an approval and the associated suspense you might feel.

After you have provided everything that has been asked for by the underwriter, you will get a bona fide loan approval. Your loan documents can be ordered and sent to the title or escrow company for settlement, and you can be that much closer to completing your mortgage transaction.

Once you have signed the loan documentation, you signed loan package will go back to the lender for review. If anything is missing, the lender will ask for it and it is up to your loan officer or the title/escrow company to make sure everything is submitted for funding. Funding is when the loan money is actually disbursed by the lender. You’re done!

If there’s one thing borrower’s should know when refinancing or purchasing a home, it is that the whole thing usually takes time. There are several entities involved in the transaction that add to the mortgage process and its seemingly grueling duration. There is the lender, the loan officer, the borrower, the title company/escrow company, and insurance company. Only after everyone has completed their job is your next loan a done deal. Keep these things in mind and accept the fact that the process is drawn out by nature, and you can calmly proceed through your next mortgage loan transaction with confidence.