Processing
After you've completed your mortgage loan application, you will submit it, along with supporting documentation like bank statements, W-2s, pay stubs, etc., to your loan officer. The loan officer will verify that he or she has all the information needed to begin processing the loan application. Once that check is completed the loan officer sends the file to a loan processor.
The loan processor is responsible for making sure that all of the information in the income and asset documentation is consistent with the information submitted in the loan application. The processor will send verification requests to your employers, landlord or current mortgage holder, and lending institutions.
At the same time, the processor will also order a property title report and an appraisal on the home you wish to purchase or refinance. The title report serves to identify any liens or other encumbrances on the subject property. The appraisal represents an objective valuation of the property and is based both on costs of replacing the home and on recent sales of comparable homes in the vicinity.
Once the processor has verified that the basic loan requirements have been met, he/she will package the loan application and documentation, validation requests, title policy and appraisal and send on the complete package to a lender's underwriting department.
Within three business days after receiving the application, the lender will provide you with a Good Faith Estimate of the anticipated closing costs. It will show estimated costs associated with the loan settlement, such as origination fees, mortgage insurance, title insurance, escrow reserves and hazard insurance.
You will also receive a Truth-in-Lending Disclosure statement. This statement shows the estimated monthly payment as well as the total cost of all finance charges on your loan, stated as an Annual Percentage Rate (APR). Since the APR includes origination fees and other charges as well as interest on the mortgage loan, the APR is typically higher than the interest rate on the loan.
After the lender has approved the loan, you will usually receive an approval letter. If the loan does not close within the specified commitment period, the terms are subject to change.