CHAPTER 3 How the Loan Process Works from A t om A to Z
Understanding the loan process from start-to-finish is the best way to ensure smooth sailing and issue-free closing. Knowing what must be done, when it must be done — and subsequently if it was done — is the best defense against lender obstacles and unexpected delays. The loan process comprise of five phases: pre-approval, origination, processing, underwriting, and closing. Most lenders’ loan procedures go through this process or some version of it. The pre-approval is when a buyer speaks with a lender, provides all of their documentation, a credit report is ran, and numbers are calculated with their ability to afford the price of the home they are looking at. Once a buyer enteres into contract on a particular home, this is then the origination. Processing is also just what it sounds like: the loan is processed by the lender. This usually includes completing the loan disclosures, ordering the appraisal and necessary documents from escrow and title, then packaging the loan to the underwriter. Underwriting is the step of lending that some people don’t know much about. When a loan goes through underwriting, a specialist compares the income, employment, credit and assets against the lender’s requirements and standards to decide whether to approve or deny the loan. This should have already been completed by the loan officer in the pre-approval stage, and the underwriter is the final sign off. We’ll go more in-depth with 9
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