Pre-qualification

A pre-qualification analysis is typically the result of information shared between a mortgage lender and a potential mortgage borrower that does not involve credit analysis and verification of your financial details.  The end product for a pre-qualification analysis will be a “ballpark” estimate of the maximum loan amount you may want to consider. Variables which will change the estimate include property taxes, homeowners insurance, and changes in rates. There is no cost or obligation for pre-qualification.  Please note, a pre-qualification does not indicate that you are pre-approved or will be approved. 

 Pre-approval

A mortgage loan pre-approval is a written loan decision following a complete mortgage application. You can typically apply for a preapproved mortgage prior to signing a purchase agreement for a home. Pre-approval requires your credit report being pulled, asset, employment, and income information.  A preapproval can also add to your negotiating strength when you are ready to make an offer on a home. Pre-approvals are not a commitment to lend money, they are simply an indication that you will be approved if all of the information you provide can be accurately documented at the time your loan application is submitted for underwriting.

Documents required for mortgage approval

Loan commitment

A conditional commitment letter states that a lender will offer the loan as long as certain conditions are fulfilled. Loans are always conditional in the early stages, but the conditions are cleared progressively as the loan moves through underwriting and processing. Conditional commitments are problematic when the requirements aren’t met in a timely manner, so it is always important to supply information needed as soon as possible.   There may be numerous conditions to be satisfied prior to final loan approval/ clear to close.

 Clearing conditions

Once you have received a loan commitment, the underwriter will supply a list of items to the loan officer or loan processor which need to be satisfied to obtain a clear to close. Items required at this stage of the loan may include, but are not limited to, receipt and review of the appraisal, re-issuing missing or illegible documents, letters of explanation, verbal employment verification, receipt of your homeowners insurance policy binder, and resolving title issues.  Quite often third party documentation is required to clear the loan for closing, and when third parties do not act in a timely manner delays may occur.

 Clear to close

A clear to close mortgage loan status indicates that you have met all of the lenders guidelines and conditions.  If you have reached this point you have a now have a firm loan commitment or final loan approval, and you are ready to sign.  “So when can I sign” you ask? That depends on the current volume of a lender’s closing department and the title company’s schedule.  It is usually going to take place 48 hours after clear to close.  You may be thinking “Why not right now?”  Unfortunately, there is still a good amount of work to do to prepare the loan for escrow.

 Escrow/ Documents/ Signing

Once the clear to close has been issued, the lender will schedule the delivery of loan documents, with closing conditions and fees for the title company to input into the HUD settlement statement.  When the escrow agent (often also the title company) receives these documents and instructions they put the dollars into the right places on for the seller and buyer.  They apply credits and debits where they are due, and generate the final cost to close.  Make no mistake, with RESPA disclosures and tolerance rules, along with legal considerations, this is no simple task.  Getting the right names, correct charges, and collecting invoices is a lot of work.  Once the lender, loan officer, and title company assure that all is correct, a final dollar amount is generated for the customer.  The amount needed for closing from the borrower comes in the form of a cashier’s check is made out to the escrow company/ title agent.

 Closed and Funded

Bring a copy of your driver’s license to close.  At closing you will review and sign all of the loan documents.  Once you sign the paperwork the lender sends your loan proceeds to the title agent. The escrow agents responsibility is to allocate funds to the appropriate parties.  On purchase transactions funding typically happens the same day you sign. Once you make it to here you finished with the loan process.  If you are buying a home, you ask, “Where are the keys?”  Oh, just one more thing…

Filed and Transferred

For purchase transactions, in most counties you will need to sign prior to 11 am in order for the title company to send a courier to the court house to file the mortgage deed.  Once deed of trust is filed and recorded at the county and the property has legally transferred, a homebuyer can get the keys!  You own the house!  You are all done… now you just have to move in.

If you have any questions about any of these milestones, please contact me .