The Loan Process in Sacramento, CA

Loan Process

Prequalification

Prequalification occurs before the loan process formally begins. The lender gathers financial information from the borrowers and makes a conditional determination about their qualifications for a loan. To start the prequalification process, click here.

Application

The application is the beginning of the formal loan process. The applicant completes a mortgage application with the Mortgage Professional 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. To contact a Anew Lending Mortgage Professional who can help you through the process, click here.

Processing

The lender reviews the documentation and provides a loan package for the loan underwriter.

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 supply it.

Mortgage Insurance

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.

Pre-Closing

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

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.”

What is the procedure at the loan closing?

The loan closing is a process of finalizing the sale and the loan.  The seller, buyer and lender (generally with the aid of an escrow agent) execute the final documents.  You will receive a commitment letter from the lender once the loan application has been approved.  Once you have the loan commitment letter, you can set a settlement date for the closing.

It is important that the settlement take place before your “rate lock period” expires.  A rate lock is a commitment by the lender to hold a promised interest rate and points for you for a specified period of time.  Although longer rate lock periods generally cost more, there are other ways to influence your interest rate.

It is also important to have any final inspections done before this set settlement date, especially if any repairs or maintenance are part of the purchase agreement. You should be prepared at the closing to pay the down payment and any closing costs applicable to the buyer.

Under the Real Estate Settlement Procedures Act (RESPA), the lender is required to give the buyer a Good Faith Estimate of closing costs within three business days of receiving the loan application.  This estimate lists the costs that the buyer is likely to pay at the settlement.

For the actual closing costs, you have the right to request to see The HUD-1 Settlement Statement (the prescribed form from the U.S. Department of Housing and Urban Development) one day before the actual settlement.  The escrow agent fills out the Hud-1 statement.  Prior to the closing, you should review all items on the settlement statement and all documents that you will need to sign in order to clarify any misunderstandings.

All participating parties will sign the necessary documents at the closing. Make sure you understand what you are signing. Some of the documents are:

The HUD-1 Settlement Statement

This statement must be signed by both the buyer and the seller.

The Deed

The deed is the legal document that transfers title to real property. The deed should contain an accurate description of the property, be signed and witnessed according to the laws of the state where the property is located, and should be delivered to the purchaser (after the agent officially records the deed).

The Mortgage

The mortgage is a lien on the property that gives the lender the right to foreclose on the property if you default on the loan.

The Truth-in-Lending statement

The truth-in-lending statement is a mandated if there have been any changes in loan terms since the loan application. It must disclose the terms of the loan, the interest rate, the loan amount, the annual percentage rate and the total payments required.

A Deed of Trust

A deed of trust is a document used in some states instead of a mortgage, that transfers legal title of the property to the trustee until the loan is paid off, giving the trustee the power to sell the property to satisfy the debt in the case of default on the loan.

The Initial Escrow Statement

The initial escrow statement lists the estimated costs to be paid from the escrow for the ensuing year, the escrow payment amount and any required cushion.

The Note

The note is the legal debt document and a promise to pay according to the terms of the loan.

The Mortgage Servicing Disclosure Statement

The mortgage servicing disclosure statement tells the borrower whether the lender will be servicing the loan or transferring it to another lender. It is important to know when your first payment is due and where it should be made.

After the escrow agent properly records all the documents, you may take possession of your property according to the settlement agreement.