While it can be said that lenders have varied criteria regarding their approval or denial of loans, there are common threads between each. We’ve compiled a handy list of actions and things to be aware of during your mortgage approval process.
- Gather Documentation – Before applying for any type of mortgage loan, you can save time by gathering the necessary documentation beforehand. Any lending institution will have a list of required documents on their website, or they’ll have a toll-free number to call. It also helps to have a head start on documents that require some shipping or clerical work to acquire, so when it’s time to provide them you’ll be ready.
- Apply (loan origination) – The term “loan origination” is a fancy way of saying “loan application.” It includes the borrower’s submission of their loan application and the steps a lender takes after it is received. Presumably, the first thing any lender does is read through the application and seek any items that raise red flags or need clarification, at which point the borrower may be contacted to clear things up.
- Credit/Income Verification – After the application is processed, the all-important credit checks begin. As mentioned, different lenders have different criteria, and the size of the loan will determine the necessary credit score. It is recommended you avoid any acquisitions that would affect your credit score while it’s being checked by a potential lender, such as opening a new credit card. During this time, lenders will also conduct appraisals if physical property is involved and use provided references to verify employment (or income, if self-employed).
- Underwriting – The mortgage passes from the loan officer to the underwriter at this point, and it becomes a waiting game. Beyond the pre-approval of a satisfactory credit score, the underwriters will view your loan potential from a legal liability perspective.
- Approval – The time it takes to garner approval may vary widely depending on the nature of the loan, but most lenders report a turnaround of fewer than two days. You should be notified of the loan’s approval as soon as the closing documents are in transit to the titleholder–e.g. the note, the deed, the deed of trust. Borrowers are notified of the time and date of their closing, as well as any closing costs.
- Closing – This is when your signature is placed on the dotted line and funds are released. At this time, you’re expected to provide any closing costs and additional expenses to the agency. Repayment will begin based on your agreement. Sometimes it’s shortly after closing. In others, you may have a grace period before any repayment is due.
- Aftermath – After closing, you generally have three days to change your mind. This is called the right of rescission. Barring any last-minute changes, you’ll be notified once again of all the particulars involved in your loan, including the first payment and its due date.
We understand that mortgage approval is an intimidating and complicated process which is why we’re here to answer your questions and assist you every step of the way. For more information about loan financing call Liberty Lending Consultants at (314) 336-9111 or visit our website at libertylendingconsultants.com.