How the Loan Process Works
There are many steps to your loan that you may not be aware of that can complicate and drag out the loan process. By reviewing the basic steps of home financing, you’ll have a better understanding of what is involved in getting a loan and process itself. I invited Trista Hopkins, senior loan officer at Directors Mortgage, to explain this process to my clients. Below is her experienced look at the loan process and what potential buyers should expect:
The Loan Process
By Trista Hopkins
Pre-Qualification and Pre-Approval
The first step in the loan process is the pre-qualification. This step determines whether the borrower would in fact qualify for a loan. A credit report is ordered and examined closely. If the qualification and credit appear suitable, a full application is taken. This application is sent via computer to an automated underwriting system for approval. Depending on the market, this can take 15 minutes or two weeks. Due to historically low interest rates, the current market is so backlogged that some approvals are nearing the one-week mark.
Initial Processing Steps
If the loan is approved through the automated system to purchase a home, the borrower must find a property. This entails numerous calls back and forth between the borrower, the loan officer and the Broker. If the client is refinancing their home, they can move to the next step in the loan process. The loan processor orders a property appraisal, verifications from employers and banks, mortgage holders and/or landlords, and any other supporting documentation that is needed. Escrow is also opened at this time, so that the Preliminary Title Report can be completed. These steps generally take two to three weeks, due to the fact that the processor generally has to wait on at least 10 other people to obtain all of the necessary information.
Choosing the Best Loan & Locking the Rate
Upon receipt of the documentation, a full file review is made for any problems and to see if any additional items are needed. Current programs are reviewed to assure the best rate and terms for the loan. If the loan is particularly difficult, it may take weeks to find a lender that will even take the loan. This too takes numerous phone calls, faxes, and e-mails. Since every borrower wants the best rates and fees possible, each loan has to be shopped. Watching the current financial market and trends of hundreds of different financial institutions is an extremely important part of my job. This helps me to advise my clients intelligently as to the best time to lock in their interest rate. The loan can be locked any time after loan approval (so long as there is an accepted offer on a property or it is a refinance). I usually receive approximately 20 calls or e-mails per day in regards to locking or answering rate questions.
Final Review
The file review generally takes 24 to 48 hours. The file is usually checked over completely by both the processor and me. When all documentation is received and reviewed, the full loan package is submitted to the “live” underwriter for a complete approval. Depending on market conditions and the turnaround time of the lender, this review takes up to five days. The client is notified of the approval when it occurs. Any additional loan conditions must be received prior to the final loan approval, which moves the file back up to the previous stage. After EVERYTHING is received, the underwriter gives the final OK to order closing documents. At that point, we are allowed to put submit a “Document Request Form” and the insurance binder is ordered. A “Broker Demand” is also sent to escrow, which outlines our fees to your escrow officer so she can properly complete your closing papers. This is a good time to review all closing costs and the loan itself, so that there are no surprises at closing.
Closing Documents
Drafting closing documents should take approximately 24 to 48 hours. There is usually a separate employee at the lending institution who does just this job. Most of the time, closing documents can be e-mailed to title.
The Closing
Once the documents arrive at title, the escrow officer needs time to review the documents and get ready for the closing. During this time, the escrow officer will likely receive at least 10 calls per transaction, between the buyer, the seller, the Brokers and the loan officer involved in the transaction. These calls can greatly slow down her job. Generally, the escrow officer will need at least 24 hours after receiving documents to put the file together. When the papers are ready for signature(s), the escrow officer calls the borrower(s) to advise how much money will be needed to close the loan and arrange for a meeting to sign papers. The Broker and I will generally try to be at the closing if at all possible, however our presense there is not necessary. Typically, the Escrow Officer is a highly trained individual, with many years of experience, and can handle your closing on their own. If a problem does arise, the Escrow Officer can call either the Broker or me. Signing the final paperwork generally takes about one hour.
One Last Review
After the client has signed the loan documents, and the Escrow Officer reviews them a final time, the documents are then returned to the lender. The lender usually needs 24 to 48 hours to review documents and give funding approval. Once the lender reviews the package and determines that all the forms have been properly executed, the money is wired to fund the loan. On a refinance, it is necessary to wait an additional three to five days for what is called a “Right of Recission.” This allows the borrower to change their mind about the loan and back out prior to funding.
Funding & Recording
The lender wires funds to the title company. The title company then records the note and deed of trust at the County Recorder's Office.This officially ends the closing process with the security for your loan becoming a matter of public record. This can usually be done on the same day, depending on market conditions. However, it is important to note, that with the recent budget cuts, most counties do not record on Fridays now, which may slow down your closing several days.
Crossing the Finish Line!!!
At this point, the borrower can get the keys for their new house, or may receive cash back if they are refinancing a property. In the current market, the entire loan process should be expected to take three to five weeks, depending on the particular circumstances of the borrower.
The loan process can be lengthy, and certainly stressful. I hope this explains a little better what I do and how that fits into the loan process. Please call me at (503) 709-1731 if you have any questions about this process. I look forward to working with you on your loan!
Trista Hopkins
Senior Loan Officer
Directors Mortgage
4550 SW Kruse Way #275
Lake Oswego, OR 97035
TristaLeeHopkins@aol.com
www.loansbytrista.com
(503) 709-1731
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