Understanding the Loan Process

The application process is basically the same for everyone, but the timing of events and the need for additional steps will depend on your specific circumstances.

Loan Stage	Event	Responsible Party	Details
Setup	Application	Borrower	The first step in applying for a mortgage is to find a loan that meets your needs. When you find the right loan, click "Apply Now" button to apply.
Setup	Loan Package	Borrower	First USA Lending will send you a package containing a copy of your application for your signature and a list of the documents that we need to close your loan. You must return the package in order for us to approve your loan. If you do not receive your package within two days, please call us instead of reapplying online.
Processing	Pre-Underwriting	First USA	Once you have submitted your application, we will then review all of your information and perform a first round of analysis to determine if there are any issues that need to be addressed before your application is submitted to a lender (known as pre-underwriting). Remember that we are brokering your account, so there may be additional requirements once your lender reviews your application.
Processing	Rate-Lock	Borrower	When First USA contacts you, we will inform you of one of the following outcomes: You are ready to lock your rate. Log in to E-TRACK to select the product you want to lock. Please lock as soon as possible, since rates are subject to change until you lock. Certain conditions need to be met before you can lock. This can often be the case if the package you submitted is missing some of the required documents. The amount of additional time required to resolve these conditions will depend on your ability to provide the required information quickly. At this time you will also be notified of whether your loan application will be handled by a loan specialist or a loan consultant.
Processing	Appraisal	First USA	Once your loan has cleared the underwriting process, we will order an appraisal on your property if one has not been ordered already.
Submitted	Loan Submission	First USA	Once your lock has been confirmed, First USA will submit your loan for underwriting.
Underwriting	Lender Decision	Lender	The lender returns an approval decision along with any conditions that need to be satisfied before the loan can close. Common conditions include an employment check and confirmation of an appraised value in line with the original property value estimate.
Underwriting	Removal of conditions	Borrower/ First USA	First USA will work with you to set and meet a closing date prior to your lock expiration. It is critical that you e-mail on a daily basis and respond promptly to any request for additional information.
Documents	Documents Ordered	Borrower/ First USA	We will notify you when your documents are ready for signing and encourage you to proactively contact your title company or closing agent to set up a time to meet.
Title/Closing	Recission Option	Borrower	Borrowers refinancing owner-occupied properties have the legal right to use this period to identify and resolve any issues prior to finalizing the loan. This recission option does not apply to purchase or investment financing.
Title/Closing	Loan Funding	Escrow Agent	Your loan will close once all conditions have been satisfied and the lender wires funds to your closing or escrow agent.

The Application Process
The application process begins when you complete an industry-standard application form known as the "1003" (the Fannie Mae designation for this form). The lender will want to verify certain information about the borrower(s) and will require additional information on the property. Borrower information will include verification of income and employment, assets, and credit history of the applicants. Some of this information will be provided by you, the applicant, as part of your application process. For example, you will be requested to provide copies of W-2 forms for 2 years, pay stubs, and bank statements for asset verification. Other information, such as your credit history, will be obtained directly from the credit bureaus even if you have a current credit report on hand. The lenders will always verify this information independently.

For the property itself, the lender will order an appraisal and a legal description of the property, such as a title report. Certain lenders will work with certain appraisal companies, so if you have an old appraisal it may not necessarily be accepted by the new lender. Even if the loan is to be made with a relatively large down payment, the lender still wants the property appraised. In the case of a purchase, other inspections may also be done, but are separate from the appraisal for the loan.

The Approval Process
During the "processing" and/or "underwriting" period, your credit, assets, income and other determinants are checked and compiled. At the end, your loan is either approved with conditions or approved without conditions or declined. Sometimes a loan is labelled suspended which while sounding harsh, is simply another way of saying that the lender requires more information to decide. Don't be alarmed if your loan is suspended, this is not necessarily a step towards being declined. Usually you can submit additional documents and turn a suspension into an approval.

Conditions are further documentation or checks that the lender needs to finalize your loan before funds can be dispersed. Many borrowers become frustrated by conditions that surface at the end of a loan transaction and can't understand why they are being raised so late. This is because the loan may go through several review processes prior to actual funding, and the final conditions are added on sometimes as late as after the loan documents have been signed. Just work with the lender and remember, the process is not perfect and the lender is simply trying to meet conditions imposed by other sources on them. Since most loans these days are sold and serviced by other parties, the lender must verify that the loan will be salable upon close. Whether or not you are serviced by your original mortgage lender or a new party shouldn't matter, your payment will simply be made to the new institution. No other terms of your loan can be changed after you have signed your final loan documents.

When all conditions are met, your loan documents are drawn up and forwarded to the place of settlement or closing. You sign everything and in some states the lender reviews the package one last time.

TIP: Do not make any adverse changes to your financial "picture" during this delicate time between approval and when funds are dispersed. Believing the "approval" is the final stage or that the lender won't find out about the change in debt or income or other factors can lead to real headaches. Innocent mistakes range from applying for a new department store credit card to purchasing a refrigerator for the new house, to buying two new Mercedes Benz sedans, to quitting a job to go full time into a new business. These changes will at least force an explanation to be given and at worst may cause your loan not to fund and the approval to be withdrawn. Often a lender obtains another credit report and calls your employer one last time before funding the loan.

Simultaneous to funds being dispersed, an instrument is recorded at the county recorders office to give the lender security to your property. This last step varies from state to state.

The Lock Process
Some time before your loan documents are drawn, you will "lock in" a rate for your loan with the mortgage source. The purpose of the lock is to allow you a loan at the "locked-in" rate if the loan closes before the lock period expires, even if rates are higher at the time of funding. This could be offered at the application, upon approval, or anywhere in between. Most multi-lender sources give you the choice of when to lock. Typically the shorter the time period between your lock and the actual closing the cheaper the interest rate or points.