Homes are the largest asset that an average individual does possess and to attain them they will search for considerable help that suffices their financial requirements, where mortgage loans can be a viable option. But most of the Individuals who are most probable to become mortgage loan requestees lack the understanding of how mortgage loan processes work. Even if these are used for buying investment properties and vacation homes, most of the loan requestees use this as a primary tool for their use in financing a primary residence. Home-buyers will get a maximum of 80% of the price value of the home, although there are specialized schemes that allow a mortgage payment of a higher percentage. Initially, the homebuyers should pay a larger down-payment and later a periodic monthly payment of both principal and interest that is to be paid off the loan over a time of a maximum of 30 years.
More than 70% of mortgages, that were awarded in 2020 benefited loan requestees with a minimum credit score of 760. This was a 61% increase of what in 2019 as per the reports from the Federal Reserve Bank of New York. By the last quarter, it reached 786 too. Along with the requirement of the hike in credit score, newer guidelines and restrictions too, are shooting up one year after another. Prospective borrowers are required to apply for a mortgage through any financial institutions such as banks, credit unions, or other lenders.
Individuals or companies termed as Mortgage brokers can also assist borrowers with their loan requests and deliver them the best deals available. Working alongside a broker can be very helpful, but everything comes with a charge. Lenders will fully examine an applicant’s financial situation by considering the applicant’s credit score, income, debts, net worth, and down payment. These can be further declassified with appropriate Mortgage loan processing support that can assist financial institutions in processing each loan requestee application. This article’s notion is to acknowledge loan requestees, the processes involved in Mortgage loan processing.
Stated Below are the Seven Processes that Come Under Loan Processing:
1. Mortgage Pre-approval
Getting a lender pre-approval will validate homebuyers who are financially able to buy a property. These operations are done by money lenders or financial institutions to support home-buyers in their property searches. This involves developing a three-bureau credit report that shows the credit report and credit history as reported by the third party, namely respected financial situations. Through credit reports, lenders and financial institutions can view loan requestee’s payment history which infers their commitment to paying back and lines of credit, both past and present. This Mortgage pre-approval statement will enable lenders to calculate a safe loan amount for which each loan borrowers would repay. Homebuyers could thus focus exclusively on houses in that price range. During the negotiation and deal phase, pre-approval statements will support homebuyers in the price range they can offer. Pre-approved homebuyers are often preferred as they won’t come up with multiple and simultaneous offers.
2. Loan Application
Right after the buyer has found a home that meets their respective requirements and the seller affirms their offer, the next phase is the mortgage approval process. This phase involves setting up a standardized form termed a Uniform Residential Loan Application (URLA), which involves information about the property and type of loan as well as the loan requestee. The buyers will also be acknowledged of all fees and down payment during this phase. They will also receive a Loan Estimate (LE) which itemizes the rates and associated costs related to loan processing. Affirming the intention of proceeding, loan requestees should also sign documents after the conclusion of this process.
3. Property Appraisal
Inferring professional opinion of a property, appraisal process are used for purchase-and-sale transaction for determining the contract price in given condition, location, and features. This assures the lender is not handling the borrower more money that the property is really worth. Thus home appraisal safeguards lenders from worst case scenarios, with comprehensive inspection of interior/exterior condition that affects the property value.
4. Mortgage Processing
After submitting the loan application, the mortgage loan requestees file will pass on to the processing stage which involves the collection and verification of a variety of documents from bank deposits to payment histories. The loan processors will also examine the Appraisal and Title Report checking for any issues related to the property that requires further attention. After this phase, the entire mortgage package will be passed on to the lender. Similar steps will be performed by the loan processors on each company and it will vary with the nature of the mortgage loan.
5. Mortgage Underwriting
Mortgage Underwriting involves the examination of all loan documents prepared by the loan processor to compliance with all requirements and guidelines. Taking all key decisions, underwriters will drive the approval process with the authority in approving the loan or not as per certain pre-established criteria. They will also validate the eligibility requirements of both the property and the borrower. Examining the level of risks related to each loan requestee, Mortgage Underwriters will also review the borrower’s credit histories, debt-to-income ratio, assets, and other elements that will predict they can repay the mortgage payments. Loan processors will examine elements such as capacity, credit, and collateral.
The capacity of a loan requestee is his/her ability to repay their debts including their mortgage loan. This is calculated from their income history and their total debts. A credit report involves the history of repaying their debts, while the collateral report will verify the value of the property. Any issues related to the review process will be resolved with conditional approval processes further moving forward to result in approval.
6. Mortgage Appraisal
This critical piece of the loan process drives decision-making after a clear-cut view over the loan estimation and what all the loan entails. Involving details such as loan amount, interest rate, estimated monthly payment, loan costs (origination fee, discount points, processing costs), closing costs, and other fees the lender/third-party partners charge.
7. Approval & Closing
After a comprehensive examination and verification by the loan processor, your files will be moved on to the approval & closing phase. This final step of the mortgage approval process involves sending all supporting documents to the title companies that are chosen in handling the closing. The documents will be further reviewed and forwarded to buyers and sellers for reviewing and signing for affirmation. Both parties can also search for the assistance of a title or escrow company separately. Before closing, borrowers will receive a closing disclosure, a form that infers all finalized details about the mortgage loan including loan terms, monthly payments, the total amount borrowers need to pay, and other closing costs.
We hope this article will be a guide for the effective mortgage approval process and all phases related to it. But proper assistance provided by underwriters is needed while home-buyers assist in purchasing a home without credit scores and financial institutions while generating loan processes. With all knowledge stated above home buyers/bankers/other financial situations can smoothen their processes from application requests to loan closing. OURS GLOBAL’s Mortgage Underwriting Services can help in identifying the creditworthiness and payment capabilities of the loan requestees. The professionalism and superior process quality displayed by OURS GLOBAL underwriters and loan processing support services assure quicker loan approvals & improved credit decisions. Contact us for mortgage loan processing support, mortgage underwriting, loan origination underwriting for optimum accuracy, and loan sales.