The Process For Mortgage Refinance Basics

The loan process is broken down into the following categories. Remember the quicker the borrower can get any information or answer any questions the lender may have the quicker the loan process will go.

Pre-Qualification
Loan Programs and Rates
The Application
Loan Processing
Underwriting
Closing
Funding
Summation

Pre-Qualification

The first step of the loan process is getting pre-qualified. Once a lender has gathered all the information about your current mortgage, home value, income and debts they can determine what loan program will make the most sense for you.

In attempting to approve a borrower lenders look at three factors. The ability to repay the loan or income, the amount of equity in the property or loan-to-value (LTV), and the willingness to repay the loan or credit.

The ability to repay the mortgage is verified by your current employment and total income. Typically, mortgage companies would like for you to have been employed at the same place for at least two years, or at least to have been in the same line of work for a couple years.

To determine the equity in the property or loan-to-value (LTV) an appraisal is done to determine the value, this is compared to the total balance of the mortgage on a refinance or the down payment on a purchase.

The borrower's willingness to repay is closely related to how you have fulfilled previous financial commitments, that's why we need a credit report.

It is important to remember that most approval guidelines are flexible. Each applicant is handled on a case-by-case basis. So even if you come up a little weak in one area, your stronger points could make up for the weak one. Mortgage companies couldn't stay in business if they didn't generate loan business, so it's in everyone's best interest to see that you qualify.

Choosing a Loan Program, and Rates

This is the most important part of the process. Your lender will carefully analyze your current situation to determine the best mortgage option available, they will consider your current income levels, how long you plan on staying in the home, your credit scores, if it will make more sense to pay points to get a lower rate, or if a zero point loan makes more sense and what it is exactly you want to accomplish with a new mortgage.

Shopping for a loan is very time consuming and frustrating. We want to make the process as stress free as possible while at the same time give you the confidence that you are getting the best loan on the market for your particular situation.

The Application

Once we receive your application along with all the required documentation is when the the loan process actually begins. This is when we get any documentation we may need to verify the information gathered during the pre-qualification process, such as income documentation (if needed) current mortgage payoff information, and homeowners insurance information.

Loan Processing

Once the application has been received, the actual processing of the mortgage begins. The loan processor orders the mortgage rating, title report, verifications of employment and deposits, opens escrow, and send out for the payoff(s) on any current mortgages. The processor then follows up on and examines the information as it comes back, if there are any appraisal or title issues the processor identifies a course of action. The entire loan package is then put together for final submission to the underwriter.

Underwriting

Once the loan processor has put together a complete package with all verifications and documentation, the file is submitted to the underwriter. The underwriter is ultimately responsible for deciding if the loan approved for loan documents, if it's turned down, of if it is suspended for further conditions. If the loan is approved as submitted, the loan is put into an "approved" status.

Closing

Once the loan is approved, the file is transferred to the document department where the final loan documents are printed to be sent to the closing agent. Once the closing agent receives the documents the borrower will be contacted to set a signing appointment.

At the closing the borrower should:

Bring a cashiers check for any closing costs that are not financed into the loan or down payment if a purchase.
Review the final loan documents, and make sure that the interest rate and loan terms are what you agreed upon. Also, verify that the names and address on the loan documents are accurate.
Sign the loan documents.
Bring proof of identification.

Funding

After the documents are signed, the closing agent will return the documents back to the lender who examines them and, if everything is in order, arranges for the funding of the loan. Once the loan has funded, the closing agent arranges for the mortgage note and deed of trust to be recorded at the county recorders office. Once the recording has been confirmed, the closing agent will print the final settlement costs on the HUD-1 Settlement Form and prepare the final disbursements to be made to your old mortgage company, or your seller if it is a purchase and any proceeds or cash out due to the borrower.

Summation

A typical mortgage transaction takes between 10-21 business days to complete. With the new automated underwriting systems this process can sometimes be even quicker. If you have a situation that needs funding quick, or would like to find out how long to expect to fund your loan call one of our professional loan consultants now at 800-979-4620.

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