Your Mortgage : What Happens After You Turn In Your Loan Application : Lending: It’s a complicated system, but some knowledge of how things work can demystify the process.
Applying for a mortgage loan can be a harrowing experience: Consumers often face a mind-boggling array of complicated forms, technical jargon and legalese. But understanding how the lending system works can demystify the loan process, while a little preparation can help calm your nerves and speed the time it takes to get your money.
Exactly what happens to your completed application after you have given it to your lender depends on a variety of factors, including the institution’s size, loan volume and organizational structure.
By and large, the days when your completed application was looked over by a loan committee are virtually gone, unless you’re using a relatively small savings and loan association.
Instead, your completed loan packet will probably be sent to an off-site loan-processing center operated by the lender. A clerk there “looks at your application and punches a bunch of information into a computer, including the address of the property, the loan amount and the interest rate,” said Palma Jarvis, a vice president with San Diego-based Home Federal Savings & Loan Assn.
Your application is also assigned a file number.
After all this information is recorded, Jarvis said, the computer generates a federally mandated disclosure form. Among other items, the form provides an approximate estimate of the fees you’ll pay to obtain the loan, your monthly payments and the annual percentage rate on the loan.
The disclosure form is mailed to the borrower. Meanwhile, the application is passed to a loan processor or, in some cases, directly to a loan underwriter.
Being a processor or underwriter isn’t the world’s most glamorous job, but the thousands of men and women who do it for a living are cornerstones of the home loan business.
The processor reviews your application to make sure everything is in order. Then he or she sends out a variety of documents to about a dozen different parties, including forms to establish how much you earn from your employer and how much money you have in savings and checking accounts.
The processor also orders a credit report and sends a form to the lender who holds the seller’s mortgage to find out how much the seller owes on the property, Jarvis said.
Once all these documents have been returned, they’re typically combined with your loan application and forwarded to the lender’s loan underwriter.
In a way, the underwriter is like a one-person loan committee: He reviews all the documents, double-checks the credit report, analyzes the borrower’s income and debts and performs a variety of other tasks.
If the underwriter approves the loan amount, the loan documents are filled out and sent to your escrow agent or closing attorney. The agent calls you in to sign the papers and collects your check for the down payment.
Once all the paper work has been signed, the escrow agent sends them to yet another bank employee--a “closer” or “funder.” The closer issues a check to the escrow company for the amount of your loan, less your various loan-related expenses.
The escrow company then sends checks to several parties. The lender who originally financed the property gets one check and the seller usually gets another. Checks might also be sent to a variety of other parties, including termite-repair companies and realtors involved in the deal.
The following morning, a trust deed proving your ownership of the property and the lender’s lien on the home are recorded at the county recorder’s office.
With all the people and paper work involved in the home-loan process, don’t be surprised if snags develop along the way. Here are some tips that can help you keep delays to a minimum:
* Get prequalified before you actually apply for a loan or, even better, before you start looking for a house. It’ll help you avoid looking at homes that you can’t afford and also help you get your financial house in order--an important first step in the home loan process.
* Request a copy of your credit report now. You can find credit reporting agencies in the Yellow Pages of the phone book and order a report for about $25. If the report turns up any problems, try to get them straightened out before they have a chance to cause delays in processing your loan application.
* Make sure you have all your tax and financial records handy. This includes the last two or three years of tax returns as well as W-2 forms, recent pay stubs and bank and credit card statements.
* Get your mortgage broker or loan representative to help you fill out all the paper work. If you try to do it yourself, there’s a chance that you’ll either misunderstand the forms or fill them out incorrectly--either of which can delay the processing of your loan.
* Alert your employer, banker and others that you have applied for a loan. Ask them to promptly complete and return any forms that the mortgage company sends to them to verify your earnings, savings or debt.
* Reply quickly to any requests for additional information from the lender. Also consider hand-delivering documents to the loan representative, escrow agent and others instead of handling it all through the mail.
BIGGEST RESIDENTIAL LENDERS IN L.A. COUNTY Following were the biggest residential lenders in Los Angeles County from January through October of 1989.
Lending Number of Dollar Average Institution home loans volume mortgage Great Western 12,268 $1,770,141,705 $144,289 Home Savings 8,380 $1,323,104,620 $157,888 World Savings 3,217 $598,680,638 $188,099 Home Federal 3,169 $542,793,880 $171,282 Bank of America 2,757 $509,594,943 $184,837 Security Pacific 2,341 $443,619,382 $185,655 Glendale Federal 2,337 $426,288,611 $182,408 California Federal 2,009 $374,944,036 $186,632 IMCO Realty Services 2,433 $358,859,764 $147,497 Citicorp Savings 1,781 $355,057,970 $199,359 Americal Savings 1,914 $348,806,561 $182,240 Coast Savings 1,853 $338,477,879 $182,665 Western Federal S&L; 1,774 $315,664,378 $177,939 Wells Fargo Bank 1,140 $247,614,505 $217,206 Countrywide Funding 1,695 $239,711,033 $141,422 Sears Mortgage 1,361 $223,928,552 $164,532 Weyerhaeuser Mortgage 1,291 $207,195,410 $160,492 Great American First 1,321 $203,804,945 $154,281 United Savings Bank 1,033 $172,105,077 $166,607 Empire America Realty 1,106 $165,598,200 $149,727 Other 52,912 $7,939,782,123 $150,056 Total 108,092 $17,096,774,212 $158,169
SOURCE: Dataquick Information Services
