“Prequalification” occurs before the loan process actually begins and is usually the first step after initial contact is made. In a prequalification, the lender gathers information about the income and debts of the borrower and makes a financial determination about how much the borrower may be able to afford. Different loan programs may lead to different values, depending on whether you are qualified for them, so be sure to get a prequalification for each type of program you are suited for.
The “application” is actually the beginning of the loan process. The buyer, now referred to as a “borrower”, completes a mortgage application with the Loan Officer and supplies all of the required documentation for processing. Various fees and down payments are discussed at this time and the borrower will receive a Loan Estimate which itemizes the rates and associated costs for obtaining the loan.
Once you have made application, your lender will submit your file for automated underwriting. The automated underwriting systems will review your income, assets, liabilities, credit scores, loan-to-value ratios, and your proposed loan details. Portfolio type loans do not have a pre-approval option.
Processing begins and the lender orders a property appraisal, orders title insurance, requests for verifications, if necessary, for employment (VOE) and requests for any other documents needed for processing the loan. All information supplied by the borrower is reviewed at this time and a list of items not yet received is compiled. The “Processor” reviews the credit reports and verifies the borrower’s debts and payment histories. If there are unacceptable late payments, collections for judgement, etc., a written explanation is required from the borrower. The Processor also reviews the appraisal and check for property issues that may require further discernment.
The Processor’s job is to put together an entire package that may be underwritten by the lender.
The Underwriter is responsible for determining whether the combined package passed over by the processor is deemed as an acceptable loan. If more information is needed, the loan is put into “suspense” and the borrower is contacted to supply more documentation.
“Mortgage insurance underwriting” occurs when the borrower has less than 20% of the loan amount to put towards a down payment. At this time, the loan is submitted to a private mortgage guaranty insurer, who provides extra insurance to the lender in case of default. As above, if more information is needed the loan goes into suspense.
The “Closer” will receive the conditional loan approval, obtains the documentation to clear any conditions, and submits for final sign off and final loan approval. The Closer then coordinates the closing documents for the borrower to sign. Upon receipt of the signed documents and final review, the documents are given to the Escrow Company for recording with the State of Hawaii. Hawaii does not have “same day recording” as some states in the mainland do, so funding occurs two days prior to recording.