There is a lot of fine print the goes into getting a loan. You have the basics like the who, what, where, when and why. But then you have the more complicated sections such as how much debt do you have and what is your credit history?
A loan officer is like a psychiatrist for your finances. By the end of process, they may not know a lot about your mental health, but they will know the majority, if not all, of your financial health.
However, as the lending reporter with HousingWire, I decided to dig deeper into the actual process of a loan approval.
I am sure you have heard of shows like How It’s Made, where it follows the process of how something is created from start to finish. Following suite, I decided to follow the life of a mortgage, starting with the borrower asking for a quote to the final closing of a home.
In partnership with Guardian Mortgage, I dug into the logistics behind how the loan is initiated to how it is concluded.
To start, I looked at the life of a purchase loan and will later follow with the life of a refinance and foreclosure.
Once a borrower contacts a lender, the lender or mortgage broker has to provide a good faith estimate within three days of receiving the loan application.
The GFE’s sole purpose is to provide the borrower with basic information about the loan, which helps them compare offers and understand the full cost of the loan.
From there, one of the key factors in a purchase loan is the process of how they estimate and calculate a borrower's mortgage rate.
"As we just get deeper into the process, it just gets more and more accurate. Up until the title company completes the HUD-1 settlement statements, everything up until that point is an estimate," said Wade Betz, vice president of sales with Guardian Mortgage.
However, throughout the process, the estimate is fairly accurate due to checks into the borrowers history, verifying facts from their job to their house appraisal.
Meanwhile, another huge section of a purchase loan is the time is takes from start to close, which varies with each mortgage firm.
At the minimum, a lender has to legally close within seven days. Which in reality, this is difficult to beat solely based on the fact that lenders and borrowers are slowed heavily due to waiting on snail mail.
"It is really about the individual bank. For big banks, it typically ranges around 45 days," Betz said.
Guardian specifically usually takes from 3 to 4 weeks to close a loan.
When you mix those three aspects together, the majority of the process is spent thoroughly checking into the potential borrower’s background, verifying their information and waiting on the mail.