Whether you’re buying a new home or refinancing a property you currently own, you may have some questions about the loan process. Where does your information go after your loan officer receives your application? Why do I need an appraisal? What does it mean if my loan is sold after closing? We hope to answer these questions and others by describing the loan process step-by-step.
- Meeting with your loan officer.
Getting your loan underway first involves meeting with the loan officer you have chosen to work with. This meeting may be in person or over the phone. At your meeting, the loan officer will help you fill out a loan application with your information and order a credit report. The loan application contains some sensitive information, but rest assured that every important document is handled with care and confidentiality. The credit report will reveal your three credit scores, which an underwriter will take into account when determining whether you can receive a mortgage.
——- At Southern Trust Mortgage, we offer a program called Priority Approval. Unlike what is offered by other lenders (usually in the form of pre-qualification letters), Priority Approval is a complete credit approval issued within 24 hours of the loan officer submitting your application. This approval can be used when making offers on new homes, as a true loan approval is appealing to motivated sellers and their agents.
- After the loan officer takes your application, your loan goes to processing.
During this step of the process, one of the lender’s team members checks through the application, credit report, and other documents to make sure all the information provided is correct and completed properly. At this point in the process, an appraisal will be ordered for the property you are purchasing or refinancing; the appraisal is used to determine the value of the home to assure the home’s worth is in line with the purchase price. In addition, you will receive a loan estimate and a Truth-In-Lending statement, which will show your annual percentage rate (APR).
- Following processing, your loan goes to underwriting.
After the initial processing phase is completed, your loan goes to a lender team member called an underwriter. The purpose of an underwriter is to assess the risk of your loan and insure the loan meets investor and product guidelines. The underwriter will review and verify your credit history, income, and employment. They will do everything possible to help you receive a loan approval. In order to do that, an underwriter may ask for additional information or verification, usually regarding credit or income, in order to support their approval decision. Once an approval is issued, you will receive a commitment letter that outlines the terms of your loan.
- Cleared to close!
Once all the required additional documentation -such as insurance, the appraisal, etc.- is received, your loan will be cleared to close. At closing, the closing agent will review the terms of your loan and explain each document before you sign. The agent will also provide you with a copy of the Closing Disclosure, which shows all the costs related to closing the loan.
- “Your loan has been sold”. What does that mean?
Following the closing of your loan, you may pay your lender for the first month or two of your mortgage payment, however after that point, lenders sometimes sell the loans to a new investor called a servicer. If you receive a notice from your lender to that effect, do not be alarmed. This is a common occurrence and it does not affect the loan rate, terms, or amount owed. What does change is who you will need to make your monthly payment to. If your loan is sold in the months following closing, you will receive notification first from your current lender, who must notify you within 30 days of the change. You will also get a notice from the new servicer. If you have any questions at that point, contact your current servicer.
While this list is by no means exhaustive, we hope that this helped address some common questions asked during and even after the loan process. Contact us today, and let us make home happen for you.