First-Time Homebuyers: The Mortgage Process Defined

When you apply for a home loan, it may seem like only a select few are tirelessly working on making your dreams a reality. It makes sense, as you’ll probably only come face-to-face with one or two people from your chosen lender.

In reality, many more departments and individuals operate hands-on with your loan before you’re handed the keys to your new pad. While you’re talking with real estate agents and sellers and shopping for your new home, there’s a mazelike mortgage process going on behind the scenes. To give you a better picture of how a loan is processed, we’ve defined the participants and important milestones at each step of the mortgage process.

Application

Before delving into the first stage and the parties involved, there is one crucial initiative any borrower should take before taking on a mortgage: you should be fully aware of your budget and its limitations. It’s key you figure out exactly how much you can feasibly pay each month toward your mortgage. You’ll want to ensure you can afford the home and all its associated costs (like homeowners insurance, property tax, and so on) before taking out a loan for it. Once your budget is set, it's time to begin the first step in the mortgage process.

The application stage begins when you visit a lender, the mortgage banker, or company/bank that will fund the loan. Keep in mind, you do not have to do this in person—in most cases, you can submit your application online or over the phone. You’ll fill out an application and provide financial information, such as income, assets, and employment. The lender will pull a credit report to review your credit score and payment history, as well. Then, they’ll give you the choice of loan options that work for your situation. If you qualify, the mortgage banker will provide a pre-approval letter, which can be presented to sellers to show you’re prepared to purchase their property.

During this time, a transaction coordinator will help the mortgage banker. They’ll assist in preparing your application and documents for underwriting.

Compliance/Operations Assistant

Next, an operations assistant will focus on administrative tasks associated with your loan. They’ll organize and submit your loan package to the compliance department. They’ll reach out to you with an initial disclosure package and ask for your signature, which certifies that you understand the terms and federal and state requirements of your loan.

Included in the disclosure will be a three-page loan estimate (LE) that details all the ins and outs of your loan, such as your interest rate and estimated monthly payment. After that, compliance sends the loan to the underwriting department.

Underwriting

In the underwriting stage, the underwriter will review and condition your loan before sending it to the next phase. Here at Atlantic Bay, we perform upfront underwriting. That means you’ll receive conditional approval for the exact dollar amount you qualify for before you make an offer on a home. During this time, an underwriter will review your file, decide whether you’re a good partner for lending, and condition the loan for the items needed to meet the guidelines of the product that best suits you.

When deciding on your loan, an underwriter might ask:

• Can the borrower repay the loan?

• Does the loan make sense for the borrower?

• Is there any fraud being committed?

Processing

While the underwriter is analyzing the loan, a processor is working as a liaison between you and the mortgage banker. It is their job to gather and submit any documentation sent from the borrower. The processor works directly with you to make sure you’re aware of your loan status, and they also verify all the information listed on every relevant document. They will gather information from you for the loan’s conditions, and during this time, you must meet all the underwriter’s conditions as well. If everything is in order, the processor resubmits the loan to an underwriter for a second review.

In addition, the operations assistant returns to offer support to the processor. They will assist in ordering and collecting things like verifications, homeowners' insurance, and flood insurance.

Underwriting and Compliance (Again)

Following a brief stop at the appraisal desk, a second underwriter will do a final review of the loan to, once again, make certain you are a good fit for lending and meet all of the loan’s guidelines. Compliance will make one last audit, checking the LE and closing disclosures (CD). They’ll also make sure the loan is on its way to closing in a timely manner, so you don’t experience any delays.

Closing

Rounding out the mortgage process, closing is the final step between you and moving into your dream home. The closer will prepare closing instructions and disclosures for you to sign, and they will likely run through one last pre-closing checklist. They’ll make sure your home’s title and insurance are in order, and after that, it’s time to start paying off your mortgage. There is such a thing as “post-closing,” but it takes place on the administrative side, and it’s more so a time to file all the fresh paperwork you just signed.

Hopefully, with a little better understanding of what goes on behind the curtain during the mortgage process, you’ll have more peace of mind.