How does the loan process work?

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HOW DOES THE LOAN PROCESS WORK? The mortgage loan process begins after a loan officer has taken a full mortgage loan application, which includes full identification of the property to be financed, the identification of the customer(s), their employment information (or sources of income), their current and proposed lodging costs and a financial statement showing assets and liabilities. In the USA, the application is done on a FNMA Form 1003 (which is used for all real estate loans) and includes full Details of the proposed transaction. It also lists Declarations as to the borrowers suitability for a loan. If these Declarations are answered incorrectly, the process may never begin. For example, "Are you a party to a lawsuit?" Once a full application has been taken, the loan process becomes largely an effort to verify the important information provided by the borrower, such as income, liabilities and assets. These are almost always verified in detail, through employers, banks, credit bureaus and other third parties. To accomplish this, the loan officer often asks for employment and tax records, recent bank or investment statements. The checklist of what and how things are verified is different in each type of loan and sometimes different in each banking institution. The loan officer or his processors will always order a credit report, an appraisal of the property and certain title verifications early in the processing effort . Once the verifications are assembled, the loan officer submits the loan package to formal underwriting. Some of this may be done elctronically through automated underwriting systems, but even when a customer's loan is approved in this manner, an underwriter reviews the entire file, along with the appraisal and all related documents, and provides a final clearance for funding. The underwriter is usually not the originating loan officer. Most loans are approved with some type of condition(s), often a requirement to provide further or updated verifications. Here the borrower may be involved again to assist in collecting copies of documents needed to finish the file. Once these are cleared by the underwriter or bank employees, there is a series of papers prepared for the closing. Some of these are done by outsiders, such as personnel in an escrow or title examining organization. An important part of processing is to check that there are no liens which affect the conveyancing of a good title or new mortgage on the real estate being purchased or refinanced. When this step is cleared, parties are ready to close the transaction. In loan processing, a great deal goes on beyond the eyes of the borrower: mortgage insurance and hazard insurance may have to be secured; compliance of the loan's conditions may have to be vetted with other institutions (such as government agencies, etc.); good appraisal reports need to be completed; and many verifications that do not directly involve the borrower. A good example of this might be a land survey, or a special property inspection required by the bank or end investor(s) in the loan's purchase. Marketing of the loan to an investor other than the originating bank is a actvity that goes on with most loans while they are being processed. Processing time varies greatly with the type of mortgage loan, lending institution and political locale of the property. An important consideration for a borrower wishing to complete processing quickly and agreeably is to be very responsive to the loan officer and his processors when they call for required documents or actions; the loan will usually not close without complete compliance with these requests. Times range from 10 to 60 days, depending on circumstances, with average processing time being around 30 days.
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