The Loan Process LOAN APPLICATION: The loan application (also called a 1003) starts the process. This form provides the lender with the information that they need to help determine whether the borrower is eligible for the loan. This form gives the lender information regarding a borrower's employment and housing history as well as the borrower's liabilities and assets. The application is usually taken by a Loan Consultant, in person or on the phone, or the application may be filled out on line. Different people have different comfort levels. Some people-particularly first time borrowers-are more comfortable meeting with the Loan Consultant in person because they have a lot of questions. Others prefer the convenience and ease of using the phone or the internet. Information (see "What the lender Needs") can be brought into the lender or faxed over. The Loan Consultant needs all the information to advise the borrower as to how much they qualify for and which loan program might be best for them.Apply Now . CREDIT REPORT ORDERED: The lender orders their own credit report which may be a little different from one that you have ordered yourself. The credit report will tell the lender many things including the FICO scores. Credit will determine which loans you may qualify for and the pricing. See "What you Need to Know About Credit" PROCESSING: The Loan Consultant typically turns the file over to their processor who will gather any additional information and get the file ready for the Underwriter. The Underwriter is the one who either approves or declines a loan. The processor or the Loan Consultant may run the file through the automated underwriting system. The automated system will sometimes approve loans that the Underwriter won't, but not all loan programs allow the automated systems. If the automated system approves the loan, there may be less documentation, but everything still goes to the Underwriter for final approval. UNDERWRITERING: The Underwriter is the person who approves the loan. The Loan Consultant and processor have tried to submit the loan to the Underwriter with all documentation and with all questions answered. The Underwriter is making sure that the documentation is correct and is what is needed for a given program. The Underwriter follows carefully the guidelines set by the program whether it be FannieMae, FreddieMac, FHA (Federal Housing Administration), VA (Department of Veteran Affairs or any of the other Investors. If the loan goes into default or any mistakes are found though an audit, it is the Underwriter who's signature is on the loan that they look at. CONDITIONS: When the Underwriter looks at a loan package, some things may not be clear to that person. Loans are either denied, suspended or approved with conditions. Suspended means that there are some things that the Underwriter doesn't feel will make it an approvable loan, however, if those suspense items are cleared the loan will be considered again. Sometimes these are simple mistakes or items that are presented in a way that the Underwriter has misunderstood them. Nearly all approved loans have conditions of one type or another. Often they are very simple ones like the most current paystubs and bank statements. Paystubs and bank statements cannot usually be older that 30 days at the time of closing, but because the process is so long, they typically need new ones. Conditions can be an underwriting condition, prior to doc condition, or funding condition. Underwriting conditions are items that must be approved by the Underwriter before the loan goes any further. "Prior to doc conditions" means that the condition must be in the file prior to drawing the documents for signature. Many are prior to funding like the paystubs and bank statements. Whatever the conditions are, they must be met in a very timely manner because they will need to be reviewed. DOCUMENTS ORDERED: When all of the prior to doc conditions are met-if there are any-the documents are ordered. The documents are drawn for signing in accordance to the particular loan borrower is using. Accuracy in these papers is vital to prevent them from having to be redrawn. Once the documents are drawn, they need to go to escrow for signing. Some lenders and some escrow companies are set up for e-mailing the documents and this process is becoming more widely used. SIGNING DOCUMENTS IN ESCROW: Once the documents are in escrow, the borrowers will meet with the Escrow Officer and review and sign the documents. The Escrow Officer then returns the documents to the lender for funding. FUNDING: When the lender receives the documents back from escrow, everything needs to be reviewed by the funder before the funder will order the funds. The funder is reviewing the documents and making sure all conditions are met. The two things that most commonly hold up the funding seem to be not having the homeowners insurance policy and not having the clear termite report. Most lenders only fund loans up to a certain hour of the day, typically around noon. In the afternoon they are usually reviewing files to fund the next day or so depending on when the conditions come in. When the file is ready, the funds are then wired to the escrow company.