As many of you already know that I have a real estate license in California and I am a Realtor (R), many people do not know that I am also a mortgage loan officer. Today I am going to explain the mortgage loan process and what buyers need to know about getting a mortgage for their new purchase or refinance.

While a loan officer makes it as easy as he/she can when you get a mortgage loan, there is a lot of background process that goes on behind the scene. As always, before you go on and look for a home, you want to speak to a mortgage loan officer (rather than a Realtor, unless he/she also do mortgage loans) to get yourself prequalified to see how much monthly payment you can afford, and therefore the price of the home you can afford.

Once you have been pre-approved, gone out and put in an offer for a home, and got your offer accepted by the seller, it is time to secure a mortgage loan.

The first step in securing a loan is to fill out an application and get all the necessary documentations. There are different mortgage loan “documentation” requirements. One that most people are familiar with is the “Full Documentation Loan” or “Full Doc Loan” for short. A full doc loan requires proof of income, as well as proof of assets. Full doc loan is most suitable for people who are W2 employees who get paychecks. A full doc loan calls for the most recent:

* 2 paystubs
* 2 months bank statements
* 2 statements of any other savings account, retirement account, investment account (such as 401K, stock brokerage account)
* 2 years of W2
* 12 months of rent history (cancelled checks) if buyer was renting

Another class of documentation requirement is called “stated income” loans. A stated income loan is what it really says. It allows a buyer to state his/her income and is usually suitable for those who are not able to provide income documentations (such as self-employed person or business owners). The interest rate will be a bit higher than full doc loans.

Another class of documentation requirement is called “no documentation” or “no doc loans.” This type of loans have the highest interest of all compared to full doc and stated income loans.

Once all required documentations are collected, the loan officer will package it and submit to the lender of choice. Usually withing a few days the lender will send out approval notice and it will usually come back with loan conditions. Approval conditions are additional requirements specified by the lender and it could be more documentations that are needed such as updated (most recent) paystubs or bank statements. If you were to secure a loan for a condo, it could be the master insurance policy documentation, HOA condo questionnaire.

Once all conditions are completed and satisfied, then the loan is ready to “go to docs.” At this stage the lender will print out the loan paper for it be to sent to the escrow to be signed by the buyer and notarized. Once the loan documentation is signed and notarized and sent back to the lender, it will take usually a few days for the lender to actually fund the loan. Once the loan is funded, it will be recorded by the county clerk’s office the very next business day and escrow will officially “close” on the date it is recorded.

So don’t be confused, the date that the loan is funded is not the same day the escrow will close! All in all, the mortgage loan process of collecting all documentations required for the loan, to approval, to fulfilling approval conditions, to ordering loan documentation, to signing/notarizing, and to funding and recording will take a minimum of 2 weeks. That is why it is very important, as a buyer, to have all of the income and assets documentation ready on hand in case your offer gets accepted by the seller, so that you will be able to furnish all the required documentations to the loan officers to secure the mortgage loan for you!

Tags: Personal Finance, Real Estate