Pre-qualification occurs before the loan process actually begins. The lender gathers information about your income and debts, and makes a determination about how much house you may be able to afford. It's common for a prequalification to rely on self-reported information, instead of verifying information by pulling credit and reviewing financial documents. A preapproval relies on a full credit report, submitting financial documents and obtaining a preliminary automated underwriting approval. Some state laws stipulate that only a lender can issue a preapproval letter which involves a full underwrite by an underwriter.
It's a good idea to know how expensive a home you can afford before you start shopping for one! Real estate agents and sellers will want to see you've been working with a mortgage lender so they know you can afford the property. After you've been preapproved, you'll receive a "Preapproval Letter" you can provide to the sellers to let them know your offer is serious.
Once your offer has been accepted then the application process begins. You complete a mortgage application for a particular loan program and, supply all of the required documentation for processing. Various fees and down payment options are discussed at this time. The loan officer will deliver a Lender Estimate (LE) within three days that itemize the rates and estimated costs for obtaining the loan.
Once a lender has been chosen, Home Fast Funding will submit the loan application package with all supporting documentation needed for loan approval.
The lender's processor reviews the credit reports and documentation to verify your employment, debts, and payment histories. If there are unacceptable late payments, collections, judgments, etc., the processor requests a written explanation from you. The processor also reviews the appraisal and survey and checks for property issues that may affect final loan approval. The processor's job is to put together an entire application package for the lender's underwriter.
The lender's underwriter is responsible for determining whether the application package prepared by the processor meets all the lender's criteria. If more information is needed, the loan is put into "suspense" and you will be contacted to supply more documentation.
If the underwriter approves the loan, the lender issues a conditional commitment to lend, orders title insurance, works with you to clear all conditions to its commitment to lend, and then schedules a closing time. Conditions to the lender's commitment may include issues with credit, income, or the property that may arise during the processing and underwriting process.
The closing will occur after all conditions are cleared and the lender issues a full loan approval. At the closing, the lender "funds" the loan with a cashier's check, draft or wire to the closing agent, who disburses funds, in exchange for the title transfer to the property. This is the point at which you finish the loan process and actually refinance or buy the house, subject to the lender's loan. Closings occur at different places in different states. For instance, some states require that the closing take place at a closing attorney's office, while others use a title or escrow company. You may also be able to close at your home.