What Are The Steps of The Loan Process?

This Article Is About Behind The Scenes Of The Mortgage Process And The Road To Closing

Many people do not know what goes on behind the scenes of the mortgage process. The mortgage process is a true process. It consists of many steps and stages. There are many support and operations staff behind the scenes of the mortgage process. It is a team of professionals that work together to accomplish the ultimate goal, which is the clear to close. One of the most important professionals throughout the mortgage process is the mortgage processor. The mortgage processor is the quarterback throughout the mortgage process. The mortgage processor is assigned to every borrower in the start of the mortgage process. Whether a lender is a mortgage banker, mortgage broker, FDIC Bank, credit union, every lender has its own business model when it comes to the operations behind the scenes of the mortgage process. However, the general behind the scenes of the mortgage process is similar for all mortgage companies.

Key Professionals Involved During The Mortgage Process Leading To The Home Loan Closing

The Mortgage Process Leading To The Home Loan Closing

Most first time homebuyers or borrowers who did not go through the mortgage process recently may not know the key players behind the scenes of the mortgage process. It is the team of mortgage professionals that make the home loan process leading to the closing possible. We will discuss and cover the key professionals in the mortgage process as well as their roles and responsibilities during the mortgage process. To start off with the first person borrowers will have contact with initially is their licensed loan officer. The list below will help you identify the parties involved and understand their roles and responsibilities.

Behind The Scenes Of The Mortgage Process: Key Professionals

The initial qualification and pre-approval step of the mortgage process is done by the loan officer. The loan officer will interview and qualify the borrower. They will take the mortgage loan application (1003), run credit, collect and review documents, and run the file through the automated underwriting system (AUS). Only after the borrower gets an approve/eligible per automated underwriting system and the borrower is fully qualified will a loan officer issue a pre-approval letter. Armed with a solid pre-approval letter, the borrower can hire a real estate agent and start shopping for a home. Once the homebuyer gets an executed real estate contract, the mortgage process officially begins.

How The Mortgage Process Begins
How The Mortgage Process Begins

The mortgage underwriting and approval process begin when the borrower gets an executed real estate purchase contract. The time clock starts ticking once the homebuyer turns in the real estate purchase contract to their loan officer. The loan officer makes sure he gets all the updated documents and prepares the loan package for a mortgage processor to get assigned to the file. As mentioned earlier, the mortgage processor is the quarterback for the borrower throughout the mortgage underwriting and approval process.

The Importance Of An Experience Mortgage Processor

The experience and due diligence of a mortgage processor are of utmost importance if the borrower wants the loan process to go smoothly without any stress. Sloppy mortgage processors who turn in incomplete, not legible documents are one of the major reasons for delays in the mortgage process and delays in closing. Mortgage underwriters will kick back any file that has missing pages, are not legible, or is not properly labeled. Every step of the mortgage process needs a professional that is in charge of the task at hand. The mortgage processor will do everything in their power to make sure the file is complete and ready for a mortgage underwriter to review, analyze, and issue a conditional loan approval.

Behind The Scenes Of The Mortgage Process: The Role Of The Loan Officer

The Role Of The Loan Officer

The loan officer has a lot of responsibility in qualifying borrowers and issuing a rock solid pre-approval to those who qualify for a mortgage. The biggest reason for a last-minute mortgage loan denial is due to loan officers issuing pre-approval letters without properly qualifying borrowers. Loan officers should not be issuing pre-approval letters without thoroughly qualifying borrowers. Loan officers should carefully review mortgage documents, income paperwork, tax returns, and go through the borrower’s tri-merger credit report. Loan officers should thoroughly review and check for credit disputes and/or other potential reasons why the borrower may not qualify for a mortgage. If there is doubt about a case scenario, the loan officer should get a second/third opinion prior to issuing a pre-approval letter. The loan officer is the borrower’s main point of contact during the mortgage process. The role of your mortgage loan officer is to keep you updated throughout the mortgage process. Your loan officer will work closely with your mortgage processor from the start of the mortgage process until the loan has closed.

The Role Of Processing Assistants And Loan Officer Assistants

Every mortgage company has its own way of doing business. Many top-producing loan officers who close many files every month often have one or more loan officer assistants. Some mortgage companies like Capital Lending Network, Inc. have loan officer assistants who have licensed mortgage loan originators and have years of experience as mortgage processors. Other lenders may have loan officer assistants who are not licensed and only trained as clerical support personnel. The role of a loan officer assistant is to assist a loan officer they are assigned to exclusively or to assist a team of loan officers. A good analogy is to compare the loan officer as a medical doctor and the loan officer assistant as a nurse. Loan Officer Assistants are also referred to as the LOA.

The loan officer assistant assists the loan officer with time-consuming tasks so the loan officer can concentrate on sales and generate more business. Borrowers will have a lot of communication with the LOA during the mortgage process. The LOA normally assists the loan officer in collecting documents from the borrower and getting the file ready for the mortgage processor. After all, documents are signed by the borrower and paperwork submitted, a mortgage processor is assigned to the file and takes over. The mortgage processor may have processing assistants to assist them as well. Both the LOA and the mortgage processor works as a team in reviewing all documents prior to submitting it to underwriting. Some lenders will have the mortgage processors request conditions after the underwriter issues a conditional loan approval. However, other lenders will have the processor request it from the loan officer and/or LOA and the loan officer or LOA will request it from the borrower.

Role Of The Mortgage Underwriter

The mortgage underwriter is the decision maker of a mortgage loan applicant. The loan officer will qualify and pre-approved mortgage loan applicants. The mortgage processor is the professional that prepares a borrower’s documents the mortgage underwriter needs to make a qualification and approval decision. The mortgage processor will make sure all paperwork is complete, legible, has no missing pages, and is properly labeled. Mortgage underwriters will not waste any time if any documents are not legible and/or missing. Underwriters will kick back the file to the processor if the file is not clear and/or properly labeled. This is why it is very important the mortgage processor takes their time and does not submit any files that are not complete. The cooperation of the borrower is very crucial in making the processor’s job easier so the mortgage process goes smoothly.

Underwriting Process

Once the mortgage processor feels the file is complete, it is then submitted to underwriting. A mortgage underwriter is assigned to the file. Mortgage underwriters will thoroughly review and analyze the borrower’s credit, credit scores, payment history, income, assets, liabilities, and make sure the borrower meets all agency mortgage guidelines and the lender’s overlays. The mortgage underwriter has a lot of power and discretion in issuing and/or denying a loan applicant. If the mortgage underwriter feels the borrower meets all the qualification requirements, the underwriter will issue a conditional loan approval. Conditional loan approval is once the borrower submits all conditions listed on the conditional loan approval, the underwriter will issue a clear to close. A clear to close means the lender is ready to prepare closing docs and fund the loan.

Behind The Scenes Of The Mortgage Process: Closing And Post-Closing

Closing And Post-Closing

The closing is the finish line of the mortgage process. Once the mortgage underwriter issues a clear to close, it is now the job of the team at the closing department to prepare closing docs and set a closing time and date. A closer is assigned to a borrower’s file. The closer prepares the closing documents the title company needs. The closing documents will outline the final details of your loan, including the amount, interest rate, term, and closing costs. Borrowers need to get the final closing disclosure at least three days before the scheduled closing date so you have time to review it. The closer closely works with the title company in going back and forth with figures to get the final figure and the funds to get wired. Once the loan has closed, ownership changes hands officially.

The title company will record new ownership and file other paperwork. Once the loan has closed, the lender will have the team from its post-closing department prepare the funded closed loan to sell it on the secondary mortgage market. The investor who purchases the funded loan will retain the mortgage servicing rights. The investor that purchases the funded closed loan by the lender will package up more loans and resell them to a larger financial institution such as Fannie Mae and/or Freddie Mac.

Gustan Cho is a senior mortgage expert and National Managing Director, providing direct-to-consumer advice at NEXA Mortgage LLC. We are a mortgage brokers licensed in multiple states. We are experts in FHA Loans, VA Loans, USDA Loans, Conventional Loans, FHA 203k Loans, Reverse Mortgages Jumbo Mortgages, Non-QM mortgages, Bank Statement Mortgage Loans for self employed borrowers, and alternative financing.

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