What does the lender do to approve my loan?
Typically the lender will give or send you an application "package" with instructions and necessary terms. You complete these in detail, including the financial data and account numbers, and present them to your loan officer when ready. A loan application fee will be required by most lenders to cover credit report and appraisal.
A lender takes several steps in processing your application, and different procedures exist in different areas. Primarily, your lender is busy:
- Getting an appraisal of the home you want to buy, to determine if it's worth the price you are paying.
- Getting reports on your employment, income and debt-paying ability, to determine if you are a good credit risk.
- Verifying bank deposits to satisfy down payment and closing cost needs.
- Ordering inspections, such as:
a) Housing or building code compliance
b) Completion of repairs the seller agreed to make
c) Termites or other wood-boring insects.
- Ordering the title search (sometimes by the lender's lawyer, your lawyer or a title insurance company), to determine if the seller can convey clear title to you.
- Verifying hazard insurance coverage, to make sure the home is protected against major losses.
Once all the documents are assembled, a review of your application by the lender's loan committee will determine whether or not your loan is approve. When your application is approved, your lender will send you a loan confirmation letter to put the loan amount, interest rate and monthly payment in writing.