The Mortgage Loan Process

Now that you have found your dream home it may help you to understand what your LENDER has to do in order to get your LOAN funded and you in your new home.

Lets look at some of the documentation that LENDER has to order and explain what each does.

Title Insurance

Protect the LENDER and the buyer in case the title of the home has a cloud. In other words a long lost uncle of the owner claims to have ownership rights to the home. If he is right then you and the LENDER would have major losses. The insurance protect you and the LENDER against this and various types of losses related to the title of the home.

Escrow

Most states allow user to use an escrow company. An escrow company will handle the distribution of funds among all parties involved. This makes the transaction flow smoothly if there is a neutral party involved.

Appraisal

In order to determine the value of your home the LENDER orders an appraisal. This is normally performed by a licensed appraiser in your state. The appraiser will use the sales price of homes similar to yours and make adjustments to determine the final price of your property.

Flood Report

Some areas are designated flood zones and therefore your LENDER may require you to carry flood insurance.

Now that your LENDER has the initial documentation needed to submit you LOAN it is prepared and packaged to be submitted to the underwriter.

Mortgage Underwriting

The underwriter will review your application to determine if you are qualified to get your MORTGAGE. The underwriter's job is to verify that your income is sufficient for the MORTGAGE and that you will be able to make your MORTGAGE payments on time. An underwriter will also look for evidence of fraud and or falsified documentation. The underwriter will either issue an approval or a conditional approval. The conditional approval may require additional documentation for you to get your LOAN finalized. This is a normal part of the process and even the most qualified customers will find that additional documentation is required. In today's lending environment a borrower needs to understand that any aspect of your LOAN that is not clear cut will need to be backed up by additional documentation. The underwriter will look through every document of the file and will scrutinize the appraisal , title , escrow and income documentation. The underwriter will also review the purchase documentation and most other documents involved in you buying your home.

In our next step we look at the final process of signing and funding your LOAN.