From Start to Finish, a Lenders Timeline
By: Frank Watkins
Most people are unsure of how the lending process works. If you are one that is curious on the steps a lender takes to close a transaction then please read on.
A normal loan takes about 30 days from start to finish. Most loans follow the same procedure from start to finish. However, since loans are different, certain steps may or may not be the same.
The first step is to "pre-qualify" the prospective home buyers. Questions are asked in regards to credit and income. At that time, the lender will recommend a course of action for the homebuyer; one that will fit their needs.
With a loan in mind, the URLA (Universal Residential Loan Application, aka 1003) is completed. Also the Credit report that is known as an RMCR (Residential Mortgage Credit Report) is run and scored. The credit is scored based on late payments, judgments, collections and the balance of credit cards balances vs. the card's limit and other items. Once the credit has been scored, income is computed from W-2s or 1099s and tax returns and pay stubs. Copies of Bank statements, tax returns pay stubs and other supporting documentation are collected.
When the needed items are collected the loan goes into the processing pool. Here is where all the verifications are sent out. These include verification of employment, rental and deposit histories. This process can take up to ten days. The buyer's loan is then set up on the appropriate forms for the loan selected and prepared for underwriting. This is also the time when the lender requests both a Preliminary title report and Escrow instructions. Escrow instructions should only take a couple of days, however the Preliminary title report can take as long as a week or two depending on property issues.
Generally, once the verifications are received, along with the escrow instructions and the preliminary title report, the loan then goes in for underwriting. Here is where both credit and income are formally used to determine loan approval. Once the approval is received from the underwriter, it is now time to order the appraisal on the subject property. This process can take three to four days (up to 5 days for a VA). Normally all loans that come back from an underwriter have some conditions to facilitate a rapid close. These could include letters of explanations for credit issues (if any) updated bank statements and pay stubs, termite reports for FHA and VA loans, certification if an HOA (Home Owners Association) is involved etc.
Now that appraisal is ordered, this is the time to finish off any remaining conditions in regards to your loan. It is imperative that you and the lender work seamlessly together in order to insure a quick closing.
When the appraisal is done, it is delivered to the lender to insure the property meets the minimum standards for the loan. Then the appraisal, plus any loan conditions, are sent back to the underwriter for final review. This step can take up to three days depending on the workload for the underwriter. Once these items are cleared, the loan then moves over to the Document Drawing section. This is where the loan documents are prepared. Once finished, they are generally delivered to the Escrow/Title Company for the buyers to sign.
Once you have signed the loan docs, they go back to the Funding department to insure accuracy and to ensure all final conditions have been meet. This process can take 24-72 hours. Generally the loan funds on the 2nd or 3rd day following the signing of the documents.
Once escrow/title have verified funds on the wire from the funding lender, the documents are taken to the Clark County recorder's office. Once recorded, the house is now officially your and the your agent will deliver keys.
As you can see, there are a lot items that need to be completed before a loan actually takes place. Any small problem in the sequence can cause a delay of days to weeks. In a perfect world, we wouldn't have delays. But they do happen. All we can do is try to predict and solve the problems before they happen.