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REFINANCE PROCESS

AN INSIDER'S VIEW OF THE MORTGAGE PROCESS

AFTER THE APPLICATION

So you’ve spent a boring 20 minutes while your Loan Officer takes down a complete 1003 (pronounced Ten-oh-three), also known as a Uniform Residential Loan Application. If you’re lucky that Loan Officer at least made an attempt at keeping you from tearing up with boredom and took the opportunity to get to know you a bit during the process. Once the application is complete, you hang up the phone and the LO goes to work.

At this point your Loan Officer (LO) is in a position to accurately research the loan program that suits you best. By the way, for all you out there that call brokers and ask what their rates are, if you haven’t gotten at least to the application stage, any rate-quoting is merely a tactic to keep you interested. Most likely you will be Baited and Switched (Trust me no one wants to go that route).Realistically, rate and program qualifications cannot be determined without a complete application, especially in the current market, so don’t ask and expect a real answer. Anyway, back to business. Now your LO either contacts as many Lenders as possible through some sort of automated system or he contacts just a few of the lenders he thinks, based on his experience, offer the best rates for the loan program that suits you best.

AFTER THE LOAN HAS BEEN RESEARCHED

At this point, the LO analyzes the programs he’s researched and figures out the best way to present these options to the client, whether that be via email, telephone, mail, or whatever the hell he comes up with. In an ideal world, the client choses the program he or she likes best after short deliberation, hangs up the phone, and the LO puts together a set of loan package to send to and have signed by the client. A good LO would have a list/checklist of documents that are required for you to get your loan completed.

THE FOUR STEPS IN THE APPROVAL PROCESS

A loan processor has four major steps to complete before your loan closes; all presenting varying degrees of difficulty and frustration depending on the specifics of your file. The four steps are Submission, Approval, Docs, and Funding, and we’ve already went over the submission process, so let’s tackle the three others.

SUBMITTING THE LOAN

After you’ve signed and returned the loan package to your LO, he moves onto the submission stage of the loan process. If you’ve ever heard an LO talk about his processor, this is where he/she comes into the picture. The LO decides to lock or float the interest rate at this point and then hands the file off to his processor to be submitted to the lender. A good LO will have all the potential problems with your file worked out before he hands it off to his processor, and a good processor will review the file before submission as a last line of defense; once the file is submitted, it can be too late to correct any issues that may cause your file to be declined by the lender. A good processor takes over the file almost completely at this point and updates your LO with the progress; the better a processor is, the less the loan officer has to be involved in the post-submission process.

APPROVAL

Once your file is submitted, the processor waits, and depending on the lender, waits some more, for news back from the lender that your loan has been approved. The lender will usually issue one of two types of approvals, either a conditional approval or just an approval. When the lender issues a conditional approval, it means that the loan is approved on the condition that certain things happen. Usually those things involve submitting more documents to the lender. If you’ve ever wondered why your LO calls you late in the loan process asking for you to send in more documents, it’s probably because the lender issued a conditional approval and those documents are required to meet the lender’s conditions. Again, an “Experienced LO” will ask you for all the documents listed on the checklist to make sure he doesn’t a nuisance once the conditional approval is issued by the bank. In addition to a conditional or full approval, the lender may issue Prior to Doc and Prior to Funding Conditions; these are conditions that don’t need to be met for an approval but must be met before the lender will send out your loan documents or fund your loan.

DOCS

After your loan is in “Clear To Close Status” same as final approval, the processor fills the Prior to Doc Conditions, if any, and orders your loan documents from the lender, she also lines up a notary for your signing at this point. The lender sends your loan docs to the escrow company and sends a HUD-1 to the processor; the HUD-1 is a final breakdown of the terms of the loan. Your LO should call you at this point to go over the HUD-1 and ensure everything appears as expected. The notary receives an e-mail version of your loan docs from the escrow company and heads to the signing location, at which point you sign the loan docs. Meanwhile, the processor is working on filling the prior to funding conditions, if any, issued by the lender.

FUNDING

Most loans come with a 3-day Right of Rescission, meaning even after you’ve signed your loan docs, you usually have 3 full days to change your mind, or rescind. As an example, if you sign docs on Thursday morning, the 3-Day Right of Rescission begins the next day, so it’s in effect on Friday, Saturday, skips Sunday, and Monday. In this example your loan funds on Tuesday. After the 3 full days have elapsed, and the processor has submitted the Prior to Funding Conditions, if any, your loan funds the next day. One day after that your loan is recorded in public records. Public records? That’s right. Have you ever received phone calls from brokers/lenders soliciting your business and they seem to have a bunch of information about your loan that you never gave them? They usually get that information from public record; you’d be surprised how much of your information is accessible this way.

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