The mortgage process is often unnecessarily confusing for potential buyers. First-time homeowners especially deal with anxiety and stress related to a lack of transparency on the part of their lender and an overall lack of understanding about the mortgage process. At California Mortgage Advisors, we don’t expect our customers to be experts on the mortgage process. Our Mortgage Advisors are available to answer questions and provide insight to borrowers at every step of the process. Our goal is to provide our clients with clear, direct answers to their questions that will help them understand their role in the mortgage process.
The first step to buying a home is the mortgage application process. Most potential borrowers opt for a mortgage pre-approval as opposed to waiting to apply until after they have found a home. This speeds up the application process and also allows borrowers to have a more accurate idea of their housing price range.
The application is a very basic and simple form to complete. Along with completing the standard application, the borrower will be required to supply copies of income documents and bank statements. Generally 2 years tax returns are required along with copies of W-2’s associated with the tax returns. In addition, the lender will require pays stubs covering the last 30 days. If the borrower is self-employed or an investor in other ventures, copies of K-1’s and business returns may be required. As far as assets go, the lender will require 2 months of bank statements on all assets. The lender will also review the borrower’s credit history and current credit scores. There will be some other forms for the borrowers to sign and these will forms will vary from lender to lender. Once the Mortgage Advisor collects all the important income and asset information along with the application, the loan is then submitted to processing.
This part of the process begins after the borrower has completed their loan application and supplied all the required documentation. The loan processor will organize and stack the paperwork by category. The processor will then pull the credit report and input the complete application into the loan origination software if the application was not taken online. The processor will send out verifications to employers, banks and the IRS to verify the information provided. Next the processor will calculate income and expenses and prepare the loan file for an underwriter. If the loan is a refinance or a purchase where a property has been identified, the processor will order the appraisal during this stage of the process.
The underwriting process is a detailed risk analysis conducted by the lender. The underwriter reviews the income, assets, credit and the collateral also known as the appraisal. The underwriter will verify the borrower qualifies for the loan program requested. Each loan program has different requirements for credit, income, assets and possible collateral requirements and/or restrictions. The underwriter will determine if funding the loan is an acceptable risk for the lender.
After reviewing all of the pertinent information, the underwriter will create a list of conditions that must be fulfilled on the part of the borrower before the loan will be approved. These often include things as simple as “provide proof of homeowners insurance” or “provide page 3 of a specific document”. However, the list can include virtually anything related to the borrower’s overall financial situation. The mortgage process is essentially frozen in place until the conditions of approval have been met.
Closing, also sometimes called settlement, is the final step in the mortgage process. While closing is often the most emotionally draining part of the mortgage process for the borrower, it is also the most straightforward. This is the step where money is distributed to all relevant parties and the borrower signs all of the documentation necessary for them to take possession of the home.
During this step, the seller will receive a disbursement that represents the sales price minus fees and any loans paid off through closing. The buyer must also provide a cashier’s check to cover the balance of the down payment and closing cost. This is also when the keys, garage door openers, and the deed itself are physically transferred into the buyer’s possession.
The best way for borrowers to understand their responsibilities or requirements during any stage of the mortgage process is to remain in constant contact with a CMA Mortgage Advisor. At CMA, one of our main goals is to make sure our customers understand their role in the mortgage process.
Our Mortgage Advisors are available at (800) 927-6560 to answer your questions or click here to contact us online.