As a result of the financial crisis, many layers of fact checking and documentation requirements have been added into the mortgage process. In most cases, these additional requirements are mandated by regulators and by Fannie Mae and Freddie Mac (the national authorities who finance the majority of mortgage loans). Much of the documentation that will be required and the questions that will need to be answered are not intended to cause delay or inconvenience, but rather are intended to protect you (the consumer) by helping to ensure that you are not placed into a financial obligation that you cannot afford.
Here’s a brief overview of the mortgage process and what you can expect.
Step 1 - Application Submission (Pre-Approval)
At this stage you will complete a loan application and provide various documentation concerning your property, income, assets and liabilities. This information will include, but may not be limited to, recent pay stubs, W-2’s, bank statements, etc.
Once your application is received we will also run your credit report. Borrowers may be asked to explain certain items on their credit report such as late payments or recent inquiries.
They may also need to explain unusual deposits on their bank statements. Lenders need to understand whether these deposits represent loans from friends or family members, which could affect your repayment ability.
Step 2 - Electronic Consent Acknowledgement
One of the easiest ways to accelerate the processing and closing of your loan transaction is to acknowledge your consent to communicate with Columbia Bank in an electronic manner (secure email). Regulations require that lenders receive this electronic consent (e-Consent) before they distribute any documents to you electronically.
After you submit your application you should receive an email from us asking you to acknowledge this consent. Follow the instructions in this email to provide your electronic consent. Once you have provided us with this consent we can now exchange information in a secure and electronic format. If you do not provide Columbia Bank with your electronic consent all documentation must be printed and mailed, which can add considerable time to the processing of your application.
Step 3 - Intent to Proceed
Shortly after we receive your application, we will issue you a set of disclosures which will outline the terms, conditions and estimated costs of the transaction. Once you have received these disclosures you must provide Columbia Bank with your “Intent to Proceed” before we can move forward with the processing of your loan application. This Intent to Proceed can be given to Columbia Bank in either a written (letter, email, etc.) or verbal (phone call, meeting, etc.) manner.
Step 4 - Submission to Processing
At this stage the Mortgage Processor will review the package that has been submitted by the Loan Officer. If there are any missing documents the Processor will issue a request to you. This review helps to ensure that your loan application moves smoothly through the rest of the process. During the stage the Loan Processor will also order your appraisal and title work.
Step 5 - Submission to Underwriting
Once the file is submitted to underwriting the Underwriter will calculate your income and expenses and determine if you have the wherewithal to repay the loan according to its terms. The Underwriter will also review the property appraisal to verify that the adequate collateral security. There are occasions where additional information may be required at this stage, depending upon what the Underwriter finds in their analysis. Once the Underwriter can confirm that the loan meets the bank’s underwriting standards the loan can now be approved.
Step 6 - Commitment and Closing
Once the loan is approved a commitment letter is then issued to you. The commitment letter will spell out the terms of the transaction and provide a list of any outstanding “conditions” or items that need to be submitted or resolved before the loan is able to close. You should closely review your commitment letter and work closely with your Loan Officer to clear any of the remaining conditions. This will help expedite the closing of your loan.
Once your conditions have been clear, your loan can be scheduled for closing. Several days before the closing of your loan the bank is required to re-verify your employment and refresh your credit report. This is regulatory requirement to ensure that your employment situation has not changed since the time you submitted the application. Any additional credit inquiries that are noted on this credit report, that were not on the original credit report, may also need to be explained.
Once these items have been completed, your loan is cleared for closing!
At your loan closing you will be asked to sign various documents to fully consummate your loan transaction.