The Mortgage Loan Process
One of the first things a loan officer should go over with their borrowers is the mortgage process. It’s important for the borrower to know what to expect during the mortgage process. So we’re going to go over how the loan process works.
Once a customer has a fully executed sales contract—a contract that is signed by both the buyers and sellers—and they get through the attorney approval clause and home inspection, the next step is to order the appraisal. Generally, you don’t want to order the appraisal until the attorney approval and home inspection is taken care of just in case there are any issues with either. There’s no sense in a borrower paying for an appraisal (normal cost $400) if there are any issues with the contract and/or property. During this time , the borrower would be working with their mortgage company to get all of their personal documentation together. By the time the home inspection and appraisal are done, the borrower should have gotten all of their required personal documents to the bank, which will save the borrower precious time.
The next step is for the mortgage loan processor to submit the borrower’s file to underwriting. It should be a well organized, complete file. Most mortgage bank underwriters do not want to underwrite a file until it is complete, meaning it contains everything the bank requires for mortgage approval. Once the file is underwritten, and as long as there are no issues with the borrowers personal documentation and the appraisal, the bank will approve the file and issue a commitment letter. Usually the bank will issue what’s called a “conditional” commitment. That just means that there still are some minor conditions that still need to be met before the bank can give a clear to close the loan. If there are major issues with the loan during the underwriting process, the underwriter, instead of issuing a conditional commitment, will suspend the file until certain conditions are met.
Once the borrower’s attorney receives commitment, even if it is a conditional commitment, the attorney will order title. Attorneys don’t usually like to order title until they have a commitment from the bank, because they want to make sure the deal is going through before they do work on title and have the seller update their abstract. Title can take anywhere from a couple of days to a week or two, so it’s important to get all of your personal docs in order and your file into underwriting as soon as possible.
Once the bank receives title and all of the remaining conditions on the commitment letter, the file will be cleared to close. This is where the attorneys will work out their schedules for closing. There’s usually three attorneys involved: buyer, seller, and bank attorney. Sometimes only two if the buyer uses the bank attorney to represent them, which is very common. At this point you will be getting the exact figures for closing, which should be very close to what you were quoted on your good faith estimate.
It takes on average about 45 days to close a mortgage loan. It is recommended for most people to lock their interest rate in for 60 days just to be on the safe side.