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7 Key Phases In The Home Loan Approval Process
If you are someone who just have to know everything that goes on, you will want to know who and where you loan documents are being circulated before a lender ends up with a final decision.
This is from the point of first contact to the point where you sign on the dotted line by accepting the facility letter of agreement.
Even though lenders these days advertise their fast-track services to approve mortgages within 1 to 24 hours, don’t for a moment undermine the systems and work involved.
A LOT goes on behind the scenes.
1) Loan officer
This is your point of contact. It is the face of the lender where communication will flow through.
How much rapport you build with this person may determine how much effort in pushing your application through.
Many times, the lender views this individual as just a sales person who is marketing their products. So they often get less credit than they deserve.
But they serve a critical purpose in the sales process from prospecting to building trust to closing.
He sources for business while being the point of contact of prospects until the prospect is acquired as an official client. After which, relationship managers or account managers will take over the client.
They source for new customers with their own efforts while staying within the guidelines of their employer. This can be via partnership agreements with brokers or referral sources from friends, etc.
Typically, the longer a loan officer is in that position, the easier their job becomes as they have an established based of clients who come back to them for everything.
This is even when those clients have relationship managers to manage their accounts.
The loan officer will explain the requirements to you, take you through the application process, show you available mortgage rates they have, estimate closing costs, and be the receiver of your anger when things go wrong.
They will also conduct preliminary assessment and qualification to provide you an estimation of what is the likely outcome.
Once you have submitted all the required documentation for application, these documents will be sent usually via registered courier to the lender’s backend offices.
The first person to open up your folder will the credit analyst or loan processor.
This is where they run their screening procedure and put your information through their vigorous standard equations and formulas. Their job is to follow the credit rules to the letter and generate the results from applying these internal rules.
They make diligence checks, run income verification with your employer, scan your documents for forgery, churn your credit score, etc.
At the end of this stage, they will have all important data and ratios in an overview and list the results generated for the next party.
This is the person who reviews the results that has been left on his in-tray. He ensures that everything is in order with the credit guidelines passed down from the top.
For special unique cases, this is the person who will review your reasoning and decide accordingly.
Underwriters also usually have the authority to make adjustments within a certain degree or range.
They might also insert special conditions and clauses that needs to be agreed before a loan offer can become concrete.
4) Product Manager
The product manager sometimes shows up and gets involved when needed.
They are the ones who come up with mortgage rates and deviated rates. They have no say whatsoever on whether a loan should be approved or not.
But they have the only say when it comes to interest rates and custom mortgage loan structures.
If an application does get to this phase, the product manager will send the final recommendation to the documentation department.
This is the place that will generate the official agreement that will be signed by you.
They go about drafting these documents according to the instructions passed down by the underwriter and the product manager.
6) Closer/Loan officer
Once the facility letter of offer is ready, it will be sent to you for review.
Sometimes it could be a different person from the initial loan officer who attends to you. Sometimes, it will be the original loan officer. And sometimes it can be a colleague of the original officer as he is on leave.
This is the stage where all the terms of the agreement will be explained to you in detail. You will be also be requested to sign beside important points in the agreement so as to verify that they were explained to you.
Once you have signed all the documents after agreeing to the terms of the mortgage, those paperwork will be sent to another department for account opening.
When you have a basic understanding of how these stages of approval work and flow, you will be better able to understand why sometimes it can take so long for a mortgage to be approved… and why you might be asked to provide more documents to give the workflow a nudge in the right direction.
Finally, don’t forget to find areas of negotiation to get better interest rates.