What’s The Loan Process Look Like?

House and moneyThis morning at a home inspection, I was talking with a client who’s under contract to buy a home here in the New River Valley. As we’re oft to do, we got to talking about the timing of everything going forward, and I mentioned underwriting.

What’s underwriting?“, he asked.

Whoops. Forgot that not everyone is a real estate dork like myself, so on the drive back from the home inspection I thought I’d list out the steps to getting a loan approved and closed (not to be confused with the paycheck advance loans procedure). There are more items within each step, of course, but this is a broad look at getting a loan approved. Commercial real estate loans are secured by some form of commercial property such as a hotel, condominium, shopping center or office complex.

1 – Make the application. The first time you speak to your lender (need a lender? Contact me – I have several good ones to recommend) about applying, they’re going to tell you that they need several items of documentation from you. These will include W-2s/1099s, tax returns, Separation Agreements and/or Divorce Decrees, and more. Start preparing before the meeting – if it’s a financial statement within the last three years, be prepared to provide a copy.

2 – Order the documents. Your lender has the documents they need to get started, so now they’ll order MORE documents (we’re killing trees here, you know). They’ll order a copy of your credit report, they’ll order an appraisal, and gather other supporting documents needed to process everything.

3 – Wait. This part seems to be the most difficult. There’s a mad dash to get everything to the lender, and then we sit and wait while everything comes in, and the lender sorts through it all. If there’s additional documentation that’s needed they’ll ask for it, but usually they’re just pulling levers and pushing buttons and we don’t hear much.

4 – Submit the loan. When everything’s been gathered, the lender will finalize the loan rate and terms, and then submit everything to underwriting, who underwrites (funds) the loan. They may have additional questions or require additional documentation, but by this time you’ve submitted an entire forest full of paper and you’ve got it – somewhere!

5 – Loan approval. It’s the final countdown. The documents have been gathered, and the loan has been approved.

6 – Preparing title. Now that we’re approved, your closing attorney/settlement company will begin to complete the documents necessary to transfer title. These will include the deed of trust, the actual mortgage, and more. These are the documents that will be recorded at the courthouse as public record of ownership.

7 – Closed. Now that everything’s been signed, the lender will review them one more time make sure that all of the T’s and I’s are dotted, and then they’ll authorize release of the funds to have everything paid. Congrats, you’ve purchased a house!

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