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Loan Process (step by step)

1) Prequalification

Prequalification is the first step in the loan process. The lender gathers financial information from the borrowers and makes a conditional determination about their qualifications for a loan. 

2) Fill out Application

The application is the start of the formal loan process. The applicant completes a mortgage loan application with the Mortgage Broker and supplies all of the required information and documentation for processing. Various down payments and “closing costs” are discussed at this time and the borrower will receive a Good Faith Estimate (GFE) and a Truth-In-Lending statement (TIL) that itemize the rates, loan fees, and associated costs for obtaining the loan. 

3) Processing

The lender reviews the documentation and provides a loan package for the loan underwriter for review to ensure all the lender conditions are met.

4) Underwriting

An underwriter determines whether the information provided is acceptable to offer the applicant a loan. If more information is needed, the applicant is contacted to provide the required or missing documentation.

5) Mortgage Insurance (PMI)

For a conventional loan, mortgage insurance is required when the down payment is less than 20% of the loan amount.  FHA and VA loans also require mortgage insurance or similar protections. VA loans do not require PMI.

6) Pre-Closing

During this period, title insurance is ordered, all approval contingencies are satisfied, and a closing date is scheduled for the loan.

7) Closing

At the closing, the lender “funds” the loan with a cashier’s check, draft or wire to the selling party in exchange for the title to the property. This is the point at which the borrower has completed the loan process and the transaction is “closed.” This normally takes place at a title company with a closing agent.

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