The Loan Process

Five Simple Steps

1. Loan Pre-Approval

Loan pre-approval (or pre-qualification) is the first step in the loan process. The lender will gather basic information about your income and debts, and will then determine the amount you will likely be approved for to purchase your home. 

If you are refinancing a loan on your existing home, then the pre-qualification process should help you decide whether refinancing is a good idea for you.

2. Apply for a Loan

Once you have found a property you want to buy or have determined that you wish to refinance the loan on your existing home, you then complete a mortgage application. You will be asked to supply all of the required documentation for processing. Various fees and down payment options are discussed at this time. The loan officer will deliver a Good Faith Estimate (GFE) and a Truth-In-Lending Disclosure (TIL) within three days, which will itemize the rates and estimated costs for obtaining your loan.

3. Processing your Loan

The lender will typically submit the application package to an automated underwriting system which will provide the lender the necessary documentation needed for loan approval. In some cases, the lender may also manually underwrite an application package.


The lender’s processor reviews the credit reports and documentation to verify your employment, debts, and payment histories. If there are unacceptable late payments, collections, judgments, etc., the processor requests a written explanation from you.


The processor also reviews the appraisal and survey and checks for property issues that may affect final loan approval. The processor’s job is to put together an entire application package for the lender’s underwriter.

4. Underwriting the Loan

The lender’s underwriter is responsible for determining whether the application package prepared by the processor meets all the lender’s criteria. If more information is needed, the loan is put into “suspense” and you will be contacted to supply whatever it is they may need.


If the underwriter approves the loan, the lender issues a conditional commitment to lend, orders title insurance, works with you to clear all conditions, and then schedules a closing. Conditions to the lender’s commitment may include issues with credit, income, or the property, that may arise during the processing and underwriting process.

5. Funding your Loan

Funding for your loan will occur after all conditions are cleared and the lender issues a full loan approval.


At the closing, the lender “funds” the loan with a cashier’s check, draft, or wire to the closing agent, who disburses funds in exchange for the title transfer to the property. This is the point at which you actually refinance or buy the house.


Closings occur at different places in different states. For instance, some states require that the closing take place at a closing attorney’s office, while others use a title or an escrow company. 

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