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You! Or the person applying for the loan. We consider all loan applicants potential borrowers, whether it’s for a purchase or refinance.
In a purchase transaction, this would be the party selling the subject property. They can range anywhere from individuals and families to business entities.
Real Estate Agents
Real estate agents are licensed professionals who represent buyers and sellers in real estate transaction. They will be either helping you look for a house to buy or helping a seller sell theirs. Agents usually work completely on commission.
Escrow is a neutral party that manages the transaction. In a refinance, escrow will deal with the title insurance company, the mortgage company, and the borrower. In a purchase, escrow will also deal with the seller, real estate agents, and third-party verifiers. (See What is Escrow)
Think of the loan officer as your agent, your client care representative. They’re there to help! From taking your application, running credit, and preparing a preapproval letter to locking in your rate and negotiating conditions with our Approvals Department, the loan officer is a loan expert dedicated to helping you throughout the loan process. That’s their job and what they’re each individually licensed to do.
The processor is the glue between the loan officer and our company’s internal workings. They let the loan officer know if any additional documents are needed for a file and verify all of the information obtained from you by the loan officer. They’ll coordinate with underwriters and closers to approve your loan file and let loan officers know if there are any conditions to satisfy.
An underwriter is the guard. Our underwriters, with years of industry experience and knowledge, will make sure that you qualify for the loan you’re applying for and our company is willing to fund it.
Documents preparer, funder, the closer goes by many names, but their main purpose? To close, or complete, the loan. They prepare the final loan documents package (that big stack) for you to sign. They make sure all the fees and charges balance out. At the end of it all, they’re the ones who wire the loan funds into escrow.
Quality control is a process – the process of making sure our loan files and our workflow meets a certain standard. At times during and after the loan application process, they may reach out to you to get additional documents or get your feedback. This is important to us – it helps us make sure you’re getting quality service from us.
Compliance is related to regulatory and industry requirements. They’re kind of the legal department in the company that makes sure everything we do, from our forms and disclosures to timings in when we do things, meets requirements set forth by regulators of the mortgage industry. (For an example, see What is TRID?)
Initial Disclosures (NOT DONE YET)
Closing Documents (NOT DONE YET)
An escrow is a contractual arrangement in which a third party receives and disburses money or documents for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacting parties, or an account established by a broker for holding funds on behalf of the broker's principal or some other person until the consummation or termination of a transaction; or, a trust account held in the borrower's name to pay obligations such as property taxes and insurance premiums. The word derives from the Old French word escroue, meaning a scrap of paper or a scroll of parchment; this indicated the deed that a third party held until a transaction was completed (from Wikipedia)
In a transaction, you have something, A, and someone else has something, B. You would both like to trade each other, but you want to make sure that what the other person has is legitimate. In comes escrow, a neutral third-party holder.
In a basic, all-cash purchase transaction, escrow is between the buyer and the seller. The buyer puts into escrow an earnest money deposit and a signed offer (the Residential Purchase Contract) and the seller puts into escrow an acceptance of the offer (the Residential Purchase Contract) and opens their property for inspection. When the buyer’s finished with their due diligence and decides to proceed, they wire the remaining amount for the offer into escrow. The seller then puts their property into escrow. Escrow confirms that both sides are ready to transfer and then do the next steps to give the buyer ownership of the property and the seller the proceeds of the purchase.
When a mortgage is involved, it just adds the lender into the mix on the buyer’s side. On a mortgage transaction, escrow orders a preliminary title report on the property (“prelim”). This prelim details the chain of title as well as any liens or issues with title to the property. Escrow will coordinate with the title insurance company and any other third-parties that the lender might need. At the end of the process, escrow will receive the funds from the lender to transfer to the buyer or borrower. So, essentially, there are two transactions – between the buyer and seller, between the buyer/borrower and the lender.
Thus, in a refinance, there’s only the transaction between the borrower and the lender.
The credit report is a key part of your loan application package. Most people only look at the credit score, but a credit report contains a lot of additional information that we use in qualifying your loan.
The credit report lists out Other Names that you may have used when opening other accounts. This helps us verify your identity as well as confirm whether other documents listing other names are attributable to you.
Previous Addresses you used to apply for credit may be listed as well. This helps us verify your identity and the residence history that you stated on your loan application.
Previous Employers who may have ran your credit as part of the hiring process.
Your credit score is calculated from a number of factors (See Factors Affecting Your Credit Score). In summary, your credit score is a numerical measurement of how much of a credit risk you are, according to these factors. One thing to note – credit scores differ depending on the purpose for running the credit report. Different industries have their own weights for the various factors that are a part of your credit score. So, you may notice that a credit report you run on yourself seems much higher than a credit report we run on you. This is because our maximum is set at around 800 while typically on a credit report you run on yourself, the maximum is about 900.
What is weighting?
In a series of items to be valued altogether, each item may be valued differently.
From credit cards to auto loans, accounts you’ve opened where a credit report was run should show up in this section. This section lists out the total balance, the limit (if any), the monthly payment, and how many months are left until the balance is paid off.
Additionally, the credit report will also list any late payments in the periods of 30, 60, 90, or 120 days and how many there are for each account.
A foreclosure, bankruptcy filing, or any other negative credit items will be listed on your credit report as well. If any of these exist, we’ll qualify them against our company’s acceptable risk factors. If these happened a long time ago (seasoned), then our underwriters may be more willing to approve your application.
Factors Affecting Your Credit Score
High Credit Usage
On revolving accounts (credit cards, lines of credit, etc.), if your outstanding balance is more than 10% of the total limit, your credit score will typically be affected a small amount. If your usage exceeds 30%, there will be an additional hit which extends all the way to 100%.
Any late payment will negatively affect your credit score. However, for a mortgage application, multiple late payments will affect your credit score even more.
Defaults, Foreclosures, Bankruptcies
For a mortgage application, these are considered major adverse events. However, they will be considered “seasoned” after a period of time. Until they are, it may be difficult to obtain a standard loan, however we do have portfolio products to assist in the meantime. The interest rates are higher, but making regular payments on time will help build your credit.
Please visit our Appraisal page for details.
Homeowner’s Association Certificate (NOT DONE YET)
>Homeowner’s Association Certificate is sometimes called Condo Cert. It is required by the buyer's lender. It assesses the financial and status of the HOA. The lender is looking for minimal risk in lending on a condo in an HOA. There are several things that could go wrong
Income Verification (NOT DONE YET)
Employment Verification (NOT DONE YET - Used Wikipedia for now)
Verification of Employment (VOE) is a process used by banks and mortgage lenders in the United States to review the employment history of a borrower, to determine the borrower's job stability and cross-reference income history with that stated on the Uniform Residential Loan Application (Form 1003). Lenders require complete VOE declaring all positions held for the last two years of employment history.
Most mortgages are preceded by both written and verbal VOEs. Once a lender receives the initial loan application, a Written Verification of Employment (Form 1005) is sent to all current and previous employers within the last two years listed on the application. This form is filled out by an authorized representative of the employer and includes dates of employment, positions held and a breakdown of compensation received. This information is compared to both the loan application and the income documentation, such as W2's to ensure the information is correct.
Once a mortgage has been approved and the borrowers have signed their mortgage documents, a Verbal Verification of Employment (Form 90) is conducted with all current employers prior to funding the loan. This is done to ensure that the borrower has not stopped working since the application was submitted, which would influence the terms on which the loan was approved.
VOE guidelines are different for self-employed borrowers, as a VOE should not be completed by the loan applicant. Self-employed borrowers are typically asked to provide either a current business license or, for borrowers who do not have a traditional business model, a letter from their Certified Public Accountant indicating that they have firsthand knowledge of their previous and continued employment as their tax preparer.