10 Steps to Completing the Mortgage Approval Process

Applying for a refinance or purchase loan is only the start of the loan approval process. Understanding what happens behind the scenes, with the mortgage lender, will help you be better prepared and cause the approval process to go faster. The sooner your loan is approved, the faster you can start saving money on a refinance or, with a purchase, move into your new home.

10 Steps of the Mortgage Approval Process

Contact a mortgage lender. Speak with them about your objectives. Are you looking to refinance and save money, buy a new home, purchase a rental, or get money for retirement? Whatever your objectives - it is important to share them upfront so your mortgage banker can find the best loan program for your needs.

Complete an application. The lender will send you an application to fill out and sign, along with all the necessary disclosure documents. Return them immediately. Interest rates are time sensitive so if you delay, you may not get the interest rate you wanted.

Documents. The lender typically requests two pay stubs, two years W-2s, two years of tax returns and two months of bank statements. If this is for a rental property they may also want the rental agreement and proof of rental income being received.


Underwriting. Once the lender has your documents back the loan will go into underwriting. The underwriter will review your income and assets to make sure they meet the criteria to qualify for a loan. They will look at your debt to income ratio (how much you make compared with your monthly debts), credit history, and current employment. As part of this process they may also request a verification of employment (VOE) to make sure you are still actively employed. This is the longest step in the process.

Title. Your mortgage lender will order a title report on your property to ensure that you are the owner and what, if any, other debts are tied to the property.

Appraisal. The lender will order an appraisal to determine the value of your property. It must be ordered by the lender so do not try to get one yourself. The appraiser will look for similar properties that have sold in your area within the last 90 days when determining the value. If you are using a streamline refinance program the appraisal may be waived.

Final approval. Once the appraisal is back the underwriter will review your file again, and if it meets the guidelines, issue a final approval.

Loan documents. The lender will prepare loan documents to be signed by you either at an escrow office, their location, or remotely. Make sure you sign and return the documents right away in order to keep your interest rate.

Closing. Refinance loans have a three day right of rescission period. That means that you have three days after signing to change your mind. Once this time period has past, your loan will fund and your current mortgage will be paid off.

Statement. The mortgage lender will send you a statement with a new loan number and information on how to pay your loan. If you do not receive this within two weeks, call the lender to make sure you are not late making a payment.
Refinancing and buying a home is easy if you work with the right mortgage banker. Make sure they are an FHA approved lender so that you have access to all types of home loans. Mortgage interest rates are historically low so now is the time to purchase or refinance. You will save hundreds every month and thousands over the life of your loan by securing a low interest rate.

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