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Steps in the Mortgage Application and Closing Process
Step 1. Application:
Filling out a mortgage application, known as the Form 1003, starts the process. You may make an application several ways; in person, telephone, fax or Internet.
By far the easiest and quickest way to complete the Form 1003 is online.
Step 2. Credit and Documentation:
Once you have completed your online application you will be given instructions to print and sign the application and fax it, along with certain documents such as, last two years W2 forms, last 30 days pay check stubs and last two months checking/saving statements for supporting information. (Note, items may vary according to the loan program you may need.)
Step 3. Shop for the best rate and terms for which you qualify:
With the information supplied in Steps 1 & 2 Rate One Mortgage will match you specific needs with the dozens of investors and hundreds of loan programs available to find the best program, rate and terms for which you qualify. Depending on your credit and mortgage needs you may receive a conditional approval within minutes or the process could take several days.
Step 4. Conditional Pre-approval:
Based on the results in Step 3 your Mortgage Consultant will know whether
he/she will be able to issue a Conditional Pre-approval letter. This letter acknowledges
that the borrower is Conditionally Pre-approved for a specific loan amount and
type providing certain conditions are met. (Note, typical conditions are appraisal,
title, full insurance and no change in employment status or credit status etc.)
Step 5. Appraisal Deposit
Once you've signed a contract to purchase a home, you will make a $300 deposit to pay toward the cost of the independent appraisal that may be required.
Step 6. Processing:
At this point the loan then goes into what is known as processing. The Processor will collect any information or documentation asked for if not already in your file. The information is matched to the application and any discrepancies noted and addressed. At this time title and the property appraisal are ordered. When these items are received the file is sent to the underwriter.
Step 7. Underwriting:
The Underwriter assesses the risk factors and will issue a list of conditions or stipulations for Processing to complete. When all the conditions are met, the Underwriter notifies Processing that there is a Clear to Fund. (Note, the time to complete Steps 6 & 7 may vary due to the type of loan and the length of time it takes to receive and clear all the conditions. Normally this takes three to seven days. If there is a major problem(s) with the appraisal, title, credit or proving source of funds it will take longer.)
Step 8. Clear to Fund:
Clear to Fund is issued when all conditions have been met and the lender agrees to sign off on items requested. Closing Documents are ordered and sent to the title company, attorney's office or the escrow agent. All of these types of organizations may close a loan, depending on state and lender guidelines.
At this point a closing time and date is agreed upon between the lender, closer, borrower(s), seller(s) and their representatives. The borrowers should contact the title company, attorney's office or escrow agent to find out the exact amount of money they must bring to the closing. (Note, most agencies will only accept cashier's checks or money orders, no personal checks or cash are accepted.)
Step 9. Funding:
There are different guidelines for each state. Some require funds to be at the table and other states will do what is called a dry funding. The difference is that at a dry funding the loan will actually close without the money being there. The funds will be sent after the loan documents are reviewed by the lender. All lenders do however require a copy of the HUD1 or Settlement sheet be reviewed before either the wire transfer is sent or the check is made acceptable for deposit. In other words they want to make sure everything is correct before disbursement occurs. In the case of a refinance there is a three day period of rescission. This allows the borrowers the option to change their minds regarding the new loan. After the three day period is up, the loan funds and disbursement will occur.
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