The Residential Loan Process In Eugene
Let’s walk through the following loan process in Eugene that consumers can expect to go through when applying for a loan to purchase property:
- Loan pre-qualification or pre-approval
- Loan application
- Loan processing
- Underwriting analysis
- Loan approval/disapproval
Let’s look at what takes place during each step of the loan process in Eugene.
Loan Pre-Qualification or Pre-Approval
Before prospective buyers go house hunting, they should first get an idea of how much house they can afford. There’s no sense looking at $500,000 houses if they only qualify for $300,000, right? Buyers can take one of two approaches to do this:
- Loan pre-qualification: The buyer provides information to a lender about income, assets, debt, and how much money is available for a down payment. The lender uses these numbers to provide the buyer with a pre-qualification letter that estimates the amount for which the buyer might qualify but doesn’t verify any of the information. This letter helps the buyer understand what price range to shop in, and there’s usually no cost to the buyer.
- Loan pre-approval: The buyer actually applies for a loan with a lender. The information about income, assets, debt, and money available for a down payment is accompanied by some supporting documentation. The buyer might also be required to pay an application fee at this point. The lender will verify the buyer-provided information, determine the buyer’s ability to finance, and decide what that magic number might be. While there’s no guarantee at this point that the buyer will receive final approval for the loan, a loan pre-approval is generally viewed more favorably than a pre-qualification because of the verification of buyer-provided information. It’s a good way to show a seller that the buyer’s offer is viable. However, until a property has been identified, or the buyer’s financial condition is such that the lender can easily pre-approve a loan, pre-approval is rare.
Once an offer on a home is made and accepted, it’s time for the buyer as a part of the loan process in Eugene to work with the lender (or mortgage broker) to select a loan. The buyer completes an application and provides required supporting documentation to the lender.
The Loan Estimate
The Real Estate Settlement Procedures Act (RESPA) requires lenders to provide borrowers with a Loan Estimate of fees that will be due at closing. The Loan Estimate is designed to provide disclosures that will be helpful to consumers in understanding the key features, costs, and risks of the loan for which they’re applying. The Loan Estimate must be provided to consumers no later than three business days after they submit a loan application. If the borrowers don’t inform the lender that they want to proceed with the loan, the estimate will expire after 10 business days. Savvy consumers will shop around and receive estimates from more than one lender during the loan process in Eugene in order to compare the offered terms. If any terms or conditions of the loan change prior to funding, a revised Loan Estimate must be provided to the consumer. Items that would prompt revision include:
- An adjustable-rate loan changes to a fixed-rate loan (and vice versa).
- The amount of the down payment changes.
- The property appraisal necessitates additional funds.
- A credit score changes, resulting in changes to the interest rate, additional reserves being required, or an additional down payment being required.
- The lender is unable to verify certain income sources.
- The interest rate, or points required to maintain the interest rate, change.
Because all lenders are required to provide the exact same Loan Estimate form, borrowers are easily able to compare loan costs between different lenders. Real estate professionals and borrowers should pay particular attention to negotiable items or those that borrowers can compare, such as origination fees and discount points, assumption and title insurance costs, as well as mortgage broker, application, notary, document preparation, and rate lock fees.
The loan processor verifies that the correct information and documentation have been received based on the loan requirements. This will typically include documents related to the buyer, such as bank statements, pay stubs, and W-2 forms, as well as information related to the property, such as the appraisal and title report. This part of the process may take from one to several weeks, but a lot depends on the lender, the loan, the buyer’s financial circumstances, and the buyer’s prompt attention to requests for additional documents.
When all of the required paperwork, referred to as the loan package, is complete and validated, the loan application goes to the underwriter for analysis. Here, the borrower’s ability to repay the loan, the value of the property, the type of property, and the loan-to-value ratio are analyzed. The underwriter then makes a recommendation regarding whether the loan should be approved or denied. A typical timeframe for this part of the process is three to five days.
A loan committee reviews the analysis and the recommendation from the underwriter to provide a final approval or disapproval. The approval may be conditional based on receipt of additional documentation from the consumer. If approved, the borrower will receive required disclosures and papers detailing the final terms of the loan. These must be approved and signed before closing and funding the loan. If denied, the lender must supply a written explanation outlining the reason the loan isn’t approved.