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Steps to Mortgage Loan Process in Texas
Home buying or refinancing could be one of the most overwhelming experiences. There could be a lot of confusion as the people in the industry have made things not very understandable to be able to go through the mortgage loan process.
So today we will go through step by step understanding of what happens in the process and what to expect during the mortgage loan process.
Step 1: Complete Mortgage Loan Application
This can happen at a couple of different points during the mortgage loan process. If you are buying a home, the first process begins with talking to a lender and getting a pre-approval.
Basically, the lender will go through some client questionnaires to get your financial status.
After that, you would be asked to submit the documents to verify your application.
Common documents required are mentioned in our post “List of Common Documents for Refinance”. In the complete application process, there would be a credit check.
What your lender would be doing is assembling a picture so that you would be able to qualify for the house that you want, or qualify for the loan amount that you are refinancing.
After the lender issues you a pre-approval you would be able to partner with the realtor to look for some homes that you like.
After searching for some houses you find one that you enjoy, you would now write contracts.
Once you sign a contract, your lender gets a copy of the contract as well, and that is when your loan process starts.
Step 2: Mortgage Loan Application in Process
In this part of the mortgage loan process, the lender takes your application and the documents you have submitted and puts them together in one file to be able to send it to the underwriter.
In this process, lenders might ask for some updated documents like more recent paystubs or maybe some additional documents to make sure the file is wrapped up and ready to go.
In this process, you would also receive a loan estimate which would give you every single feature of your loan.
To understand what is included in a loan estimate, you can go through our blog post “Understanding Loan Estimate”. A loan estimate would give you a clear idea of how your loan is going to function in the future.
Once we get that stage done, we move on to the appraisals.
Step 3: The Appraisals
Most lenders go ahead and order the appraisal early because sometimes, it can take up to a week to get the appraisal report.
The borrower pays the cost of the appraisal upfront. After the payment, the appraisal is scheduled, and a certified appraiser will review the property in question for evaluation.
The appraiser will submit the appraisal report to the lender who would mention the appraised property value.
This is one of the critical parts of the mortgage loan process as it determines the value of the house and the down payment that you need to make for it if you are planning to purchase a home.
It also helps the lender to know the exact loan to value ratio.
Step 4: The Underwriting
Once the lender orders the appraisals, your loan file is then forwarded to underwriting. Underwriting is done by the underwriter, who is an individual working for the lender.
An underwriter will check the files and ensure that everything meets the standards of the federal guidelines.
Basically, an underwriter would be looking at all the information that the lender has submitted including all the documents, and verify that information and make sure that your loan and your circumstance fit well with the federal guidelines for different types of mortgages.
Step 5: Mortgage Loan Approval
After going through underwriting, what the lender would be expecting is a conditional approval.
Conditional approval means your loan is approved and ready to go, there are just a few things that need to be cleared before the final approval.
Conditions could be anything that the underwriter thinks is necessary to match the federal guidelines.
For example, a page missing from your bank statement to the homeowner’s insurance quote or any other missing details. It is pretty normal to have few conditions to have from the underwriter.
After the lenders receive the conditions, they will get in touch with you to make sure the missing documents or information is supplied, and all the possible conditions are cleared.
Step 6: Closing Disclosure
After all the conditions are cleared, the lender will now send you a closing disclosure, also known as a CD.
This is very similar to a loan estimate. The only difference is this document will have more accurate details and numbers which would now be finalized at the closing table.
The way that the regulations are set up in the mortgage loan process is that the loan estimate is a bit overstated.
The closing disclosure is a bit less and the final disclosure which would be sent by the title company would be the closest and would be most accurate to the fees that you would be paying at closing.
Step 7: Clear To Close
Once you sign the CD, the status of your loan process moves to ‘Clear To Close’. And when the status goes to clear to close, it means you can take a breath. The entire mortgage loan process is done and over with.
All the lender would be doing now is scheduling a time to close on your purchase or refinance. And after that, the final documents would be signed by the borrower at the scheduled time after which your loan would be funded.
Conclusion
Above mentioned steps are what you can expect during a mortgage loan process. Most of the time, people are only aware of the status of their loan process through the lender.
And if you are not aware of the terms, the process might sound a little confusing.
It entirely depends on the loan officer you are working with. A professional loan officer would always keep you updated with all the information about the process of your loan.
