Home Buddies – Home Ownership Coach – Houston, Texas

A Behind The Scenes Pass to Home Loan Processing

By Ray Peña, Texas Loan Officer

Once you have determined the type of loan program that suits your needs, the next step for your mortgage professional (MP) is to begin to secure documentation from the borrower and third party entities, coordinating inspections, appraisals, survey’s, etc. In the mortgage industry this is called “processing” of the loan. We will discuss what exactly is involved in the processing of the loan and break it down in to five sections. Three of which will be covered in this article.

An additional step that your mortgage professional will have taken is to have priced your loan and advise you on whether you should “lock-in” you interest rate. Since pricing and rate lock information are very important aspects of your loan, I will save this topic for another discussion. For the sake of this particular conversation, we will assume that your MP has provided you with a favorable rate, your loan has been locked, and the processing has begun.

Insight: What does a rate lock mean? When a rate is locked, it means that you are committed to that particular rate and you and your MP have the allotted days to close the loan. Your typical lock period is 30 days, but can go up to 45 days and as low as 15 days. Anything over the selected lock period will typically cause your rate to increase. As I mentioned, we will talk more at length about this topic and pricing in the articles to come.

Behind the Scene – On to processing
Now that your loan application has been signed and you have submitted the required documents, your MP begins the processing. Depending on the office set up, some loan officers turn the file over to a processor, someone designated to handle the file from that point on, or out source the processing to a company that specializes in mortgage processing, or they may process the file themselves.

Section 1 – File Submission
Your loan package is submitted to the lender. Here the lender will begin preliminary underwriting. In finance terms, underwriting means that the lender will analyze the credit risk of the borrower. By this time your MP should have requested your financial documents, identification information, supporting documentation regarding your financial stability, and all necessary loan apps and disclosure information related to the loan process. It is important to have all this info ready and submitted to your MP so there is no delay for the lender to review the file.

There are times when underwriters request additional information from the borrower depending on the situation. Since all loans and borrowers are different, the information that is requested, if any, will vary. This is called a condition, and we will discuss this is section three.

Section 2 – Third Party Documentation
In all home loan transactions there is third party involvement that must be coordinated through out the process. These parties include, but are not limited to appraisers, surveyors, insurance agents, Title Company, attorneys, inspectors, etc. These industry partners help with assuring the lender that the property meets the lending criteria. With a typical home loan transaction, all lenders will require this information before the lender will fund the closing of the property. Depending on how your MP organizes their work, and what lenders require at the time of file submission, will determine when these industry partners are contacted.

Section 3 – Conditions
Meeting conditions is another term used in the mortgage industry. A “condition” is a item of information that the underwriter feels they need in order to satisfy the risk level assessments. Conditions will vary. Sometimes there may be a lengthy list of conditions or just one that your MP may have already anticipated, for instance an updated appraisal or bank statement or contract. What ever it is, these conditions must be meet before the underwriter will sign off on the file and move it to the closer. There is much more to cover about conditions, so come back next week so we can finish this topic

Below is a list of documents your MP may request for loan submission.

W-2 Salaried/Wage Earners (Full Doc)
Two months pay stubs (last 60 days)
Three months bank statements (last 90 days, ALL pages)
Two years W-2s
Assets – 401K, IRA’s, Bonds, etc. (last statement all pages)
Copy of Driver’s License
Copy of Social Security Card or Passport

Stated Income (SIVA)
Twelve Month Bank Statements (all accounts all pages)
Copy of DBA or Business License
Copy of Articles of Incorporation
Letter from CPA establishing business relationship for 2 years
Two Years Tax Returns (all schedules)
Copy of Driver’s License
Copy of Social Security Card or Passport

Depending on the situation, other items that may be required for loan submission:
Certified Copy of Divorce decree
Certified Copy of Withholding Order of Child Support
Certified Copy of Release of Child Support Withholding
Bankruptcy Papers (all pages)
Bankruptcy Discharge/Release (all pages)

Third Party documentation
Other items that are required, but are part of the loan process:
Purchase agreement
Appraisal
Title work
Insurance agent/company information
Survey
Builder Contract, blue prints – if applicable

Wow, we have covered quite a bit in your behind the scenes tour of loan processing, but we still need to make sure the loan closes. So be sure to come back next week when we will continue our conversation on home loan processing.

Ray Peña is a mortgage consultant for Nation’s Bankers Mortgage in Houston, TX. Ray is a native Houstonian whose office is located in the Houston Heights. Feel free to contact Ray at raympena@gmail.com