The loan process changes in different parts of the United States. The explanation of the loan process below is a general sequence of events that takes place during the processing of your loan. Different lenders in different states have their own requirements. The descriptions below are meant to give you a general idea of what is required to go from applying for a loan to closing the loan.
The first step - the loan application
As might be expected, the first step in obtaining home loan financing is to fill out the loan application (also called a "Fannie Mae 1003", or "Uniform Residential Loan Application") with an experienced loan officer who will be happy to assist you in filling out the loan application if you should have any questions. He/She will make an appointment to meet with you at your convenience if you desire. Whether you choose to meet with a loan officer or fill in our online application, you will eventually need to provide the lender with some personal and financial information. If you are unable to provide some of the required documents, you can provide them at a later date before your final approval.
Do I have to meet in the loan officer's office?
No! It is possible to complete the loan process without attending a meeting in their office. This can be done by doing one of the following:
Filling out our online application form
Printing and filling out the blank Fannie Mae 1003 on the lender's site
The loan officer will fill it out for you by telephone
You may FAX your application to the lender
Or you may mail your application to the lender if you wish
When the loan officer does talk to you, he/she will discuss different possible loan programs available to you that might best meet your needs, the interest rates available, and your financial and property qualifications for the loan program you've chosen.
After I fill out the application, what happens next?
Once you have chosen a loan program and interest rate, the application has been filled out and you have provided the lender with the necessary information:
Verify your employment history
Verify your bank account information
Obtain your credit report
Order your preliminary title report
Order your appraisal.
Once this information is returned to the lender, they will compile your loan documents and submit them to the underwriter for final approval.
What does it mean when my loan is approved "with conditions?"
Your loan may be approved as submitted, approved with conditions, or a counter offer may be made for your consideration. If there are conditions on the loan in order for it to be approved as submitted, the loan officer will work with you to satisfy these conditions. Conditions might include an explanation letter of some sort, copies of investment documents, copies of divorce papers, or any number of things that may help clarify your qualifications for the loan.
After the loan conditions are met (if any) and the loan is approved, the necessary documents are prepared for closing. The lender will draw up the necessary documents along with any (prior-to-funding) conditions that have yet to be met, and in most cases send them to title company to be signed by you. Your escrow officer will arrange for an appointment with you when the loan papers are ready to be signed.
What does "Close Escrow" mean?
The task of closing the loan is normally the responsibility of the escrow officer. This escrow officer at the title company is responsible for gathering together all of the necessary documents (deed of trust, promissory note, etc.) and making sure all documents are signed. Following the lender's instructions, the escrow officer, then calculates the various proration, charges and adjustments (interest on your old loan, interest on your new loan, money for impound accounts for taxes and insurance, etc.), makes sure all of the funds are deposited (if any) and provides you with a settlement statement showing all of the costs involved in the loan. The escrow officer also makes sure that all of the parties involved in the loan process are paid after the loan funds. Your loan will then "close escrow" and your new loan will be recorded.
What is a "Right of Rescission?"
After you sign the loan papers, they are sent to the lenders funding department where they do a final check to see that everything is in order. On a refinance, there is a 3-day right of rescission period. This means that you have 3 days from the day you sign the papers to change your mind about following through with the loan. If you have not exercised your right to rescind during the 3-day right of rescission period, the funds are released. On a purchase loan, the 3-day right of rescission does not exist. The loan funds are then distributed to the proper parties and the documents are recorded at the county recorders office. The loan is done!
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