The Mortgage Process is Simply the Perfection of a Loan Application

loan-applicationUnderstanding the mortgage process is a constant frustration for consumers.  One can search the web and find all kinds of long articles breaking the mortgage loan process into anywhere between 6 and 9 individual steps.  Upon reading these, a consumer gets even more confused since each individual step is confusing in and of itself.  Unfortunately, the wrong question is likely getting answered in these articles.  Most mortgage clients don’t want to become experts on the minutia of processing and underwriting, they just want to know where to start and have an accurate context for why everything happens as it does.  The answer for each of these questions lies in the same place.

The mortgage process begins and ends in the same place, with the mortgage loan application.  It is filled out and signed at the beginning and updated for signature at the closing.  But here’s the key point; every step of the mortgage process is dedicated to verifying a fact or validating an assumption on that was disclosed on the initial loan application.  The loan application is broken in to 10 straightforward sections:

1)      Mortgage type and terms requested

2)      Property information and loan purpose

3)      Borrower information

4)      Employment information

5)      Monthly income and housing expenses

6)      Assets and liabilities

7)      A summary of the credits (i.e. earnest money and the mortgage) and the costs (i.e. purchase price and closing costs) of the transaction

8)      Miscellaneous affidavit section (this covers intent to occupy the property, citizenship and other items)

9)      The agreement section (this is the fine print legalese and where the loan application is signed)

10)   Information for government monitoring (this covers race, ethnicity and gender)

Nearly all documents a borrower is asked for or asked to sign will directly or indirectly relate to this document.  Nearly all of the 3rd party reports and vendor services used in the loan process will directly or indirectly relate to this document.  Throughout the process, as new or updated information is obtained by the lender, the application is updated and re-reconciled with underwriting guidelines.  In short, almost all of the mortgage loan process is a collection of acts designed around verifying facts or validating assumptions in this document; the loan application.

Knowing this, what should a prospective borrower seek to do?

If asked to fill out an online application, a paper application or do one face to face with a loan officer. . .  be thorough when the initial loan application is filled out.  For instance, if there is approximately 11 thousand dollars in a savings account, don’t put 11 thousand dollars on the application if the real figure is 10,771.41.  Use 10,771.41 as the figure for the application.  If the income is approximately 4000 a month but in reality its 4166.67, make sure the figure on the initial application is 4166.67.  Also, insist that your loan officer be accurate on the initial loan application.  If you see errors, however small, make sure that he or she corrects them immediately.  Don’t tolerate sloppiness.

This may seem like a tedious way to start the mortgage loan process but it has down line consequences.  Benefits of an accurate initial loan application include better loan recommendations, faster processing, faster underwriting, a more predictable transaction but most of all . . . fewer if any surprises.

Sure the loan process has a lot of confusing moving parts but if you want to keep it simple, just know that it’s almost all about the accuracy of the loan application and you’ll be way ahead of the game!

loan-application

Charles Dailey – Branch Manager, Loan Officer, Certified Military Housing Specialist – CA DOC, MN DOC & WI DFI

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