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This explanation is to help you understand what's going to happen, when, with
some "why".
By now, you've been "pre-qualified", which is my opinion of the best loan program options, rates and loan amount for you. Adding your down payment to the proposed loan amount determines the sales price.
The next step is "credit approval". This is confirmation of your qualifications by an Underwriter ("loan committee"), which gives you a written loan commitment, with "conditions". Credit approval can happen without a specific property (called "pre-approval") or shortly after you've found your home. Credit approval requires specific documentation that you provide, which is listed on checklists we give you. IT'S CRITICAL THAT YOU PROVIDE EVERYTHING WE'VE ASKED FOR, AS THIS SETS UP THE TIMING AND IS THE FIRST STEP IN THE ENTIRE PROCESS. TAKING THE TIME TO FIND AND PROVIDE THIS DOCUMENTATION WILL MAKE EVERYTHING EASIER AND QUICKER LATER, WHICH REDUCES YOUR STRESS AND HASSLE.
Normally, credit approval should take less than 5 days. Occasionally, because of some factor in your situation, we may not be able to get credit approval in that time. I will discuss it with you if that's the case. In all cases, if you're pushing the limits of qualifying in some way, this process will be more difficult than if you're within normal qualifying guidelines. It's my job to advise you of that early on, and to find and help define factors in your situation that overcome the weakness. Underwriters will always want more information from you if you're pushing limits than if you're not, and in general, qualifying for a loan today, even if rates are low, is harder than before. The amount of documentation lenders now ask for is generally more than in the past. Also, while I don't want to ask you for information more than once, if the information you provide raises more questions, I will have to come back to you with the Underwriter's request.
Credit approval is a preliminary commitment by the Underwriter that you are a qualified buyer. Because the property itself has not yet been analyzed, and depending on conditions to the credit approval, you do not remove the loan/financing contingency in your Earnest Money Agreement at this time. Credit approval assures you that you're not wasting time and energy in pursuing a specific loan amount.
"Conditions" are unanswered questions that have to be addressed during the loan process. Initially, they can be things like finding a specific property, getting it appraised, etc., along with any questions the Underwriter has about your specific financial affairs as they relate to your ability to buy a home. Later on, conditions could encompass things like where your money for the down payment and closing costs is coming from, or proof you paid an old debt. We will tell you, in writing, what the conditions are when we have them, and will help you satisfy them as we work our way through the process.
Concurrent with the credit approval processing, we will order the appraisal, title insurance, etc., which are the documents that help us qualify the property. An up-front application deposit covers these costs and will be credited back to you at closing.
When both your credit and the property are qualified by documentation in the file, we submit the file to the Underwriter for "final approval". Final approval is the loan commitment necessary before removing the financing/loan contingency in your Earnest Money Agreement, as it means you and the property are acceptable, and that we can proceed to closing. Once we have that final approval, we will prepare the loan closing documents and forward them to the Escrow Company.
The Escrow Company will then call you to arrange a convenient time for you to sign the documents and bring in your funds
(bank wire or cashier's check only) to pay your closing costs and the down payment, less the Earnest Money Deposit and the loan deposits you pay to us. This appointment for signing documents is NOT your closing. We normally get sample loan documents to you to read and review prior to coming in for the signing. Please remember to bring photo identification with you for the Notary.
Closing will happen a day or so after the last party signs the documents, when the lender agrees that all outstanding conditions have been satisfied and they send funds to Escrow to pay off the seller. Your Earnest Money Agreement specifically tells you when you get possession of the property, which is when your Realtor will get the keys to you.
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