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The Mortgage Process—What to Expect

When you’re prepared for the home buying process, you can avoid surprises and plan accordingly. Before we dive into the process, however, let me first introduce to you all the parties involved in home buying process.

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The Parties Involved

The buyer/borrower

This is you! It may also include your co-borrower.

Loan officer

This is a mortgage specialist who will review all your information (credit, finances, income, assets etc.) to see if you qualify for a mortgage. They will help determine which mortgage financing options best suit your needs and they will help you establish your price range.

Loan processor

This person will prepare your mortgage loan information and application for review by the mortgage underwriter. The loan processor ensures that all paperwork is completed correctly and presented in the proper order.

Mortgage Underwriter

A mortgage underwriter is tasked with reviewing your application to determine if you are eligible for the mortgage loan for which you are applying. This decision is based upon your income, assets liabilities and credit and the appraisal on the home.

Real estate appraiser

The job of the real estate appraiser is to appraise the property you are buying to establish its fair market value based on comparable sales.

Home inspector

The home inspector inspects the home to determine the overall condition of the home. He/she looks for any unseen problems.  Defects, such as the need for plumbing repairs, could impact your negotiations with the seller. A home inspection is still optional, but highly recommend.

Title Company and closer

The title company does all the behind-the-scenes research on the title to the property, making sure you get rightful ownership at closing. The title company closer walks you through all the closing documents, notarizes your signature, records the legal documents, and distributes the money to the appropriate parties.

Mortgage insurance company

If you get a conventional loan and have less than 20 percent down, mortgage insurance will most likely be required to protect the lender from losses due to foreclosure. The mortgage company will obtain this for you.

Homeowner's insurance company

You make arrangements for your homeowner’s insurance. Homeowner’s insurance provides liability coverage in the event someone gets injured on your property and provides coverage for losses due to fire, wind, hail and or many other unforeseen circumstances that could cause damage to your home.

Homeowners association (HOA)

If applicable, the HOA manages the association and collects association dues.

The Mortgage Process, Step by Step

1. Pre-Approval Consultation

You will consult with a mortgage loan officer either in person, over the phone or online. The loan officer will collect and review your income, assets liabilities and credit, to determine your ability to repay and help you determine your price range and your best mortgage options.  Pre-approval is highly recommended over pre-qualification in which documents are not necessarily provided to the lender. The loan officer should provide a loan worksheet or closing cost worksheet so you can see what fees are involved, how much it will cost you and how much your mortgage payments will be.

2. Collect and review documentation

Your mortgage loan officer or your loan processor will collect and review all the necessary documents.

3. Complete Loan Application

The loan processor will complete all sections of your loan application and run your loan through automated underwriting.

4. Automated Underwriting LP and DU

AUS or Automated Underwriting is the first step in the underwriting process. DU also known as Desktop Originator or LP known as Loan Prospector are computer programs that pre underwrite the loan to determine your eligibility. Note: The information submitted for the AUS approval has to be verified in final underwriting.

5. Full Underwriting if Necessary

If there is anything unusual about your file or anything that the loan officer or loan processor are not sure of, they could submit your file for full underwriting. This could avoid any uncertainty and make sure the borrower qualifies before sending a pre-approval letter.

6. Conditions

Additional information may be required to fully complete your loan application such as, verifications of employment or letters of explanations as required to explain any discrepancies.

7. Pre-Approval Letter

The Lender will send a pre-approval letter stating the loan amount and loan type you are pre-approved for and they will list any conditions of final loan approval.

8. House Hunting

Start looking at Houses with a Realtor®

9. Purchase Agreement

Many items of the purchase agreement are negotiable for example the purchase price, closing date, and seller contributions towards buyers closing costs etc. Don’t worry, your Realtor® will help guide you through the whole process. It a good idea to make your offer contingent upon a home inspection.

10. Home Inspection

Home inspections are still optional but highly recommended. Most people choose to hire a professional home inspector to inspect the home for it’s over all condition and advise the home owner of any defects.

11. Review numbers and option to lock in the interest rate

Loan officer receives fully executed purchase agreement, updates borrowers file accordingly and converts the pre-approval into a full residential loan application. Borrower has the option to lock in on the interest rate.

12. Update Documents

Documents in the file can be no older than 30 days from the date of the official application, so borrower may need to provide updated asset, income and/or credit docs.

13. Appraisal and Title work are ordered

The appraisal evaluates the property to establish its fair market value and to make sure it meets minimum property standards based on the mortgage you choose.  The title company does an independent title search on the property to make sure you can get clear title to the property at closing.

14. Homeowners insurance

You will need to make arrangements for home owners insurance and provide that information to your lender.

15. Final Loan Submission

At this time, the loan processor will submit your loan application to underwriting for final loan approval.

16. Additional Information if needed

The lender may need additional information to complete your file so please be patient and cooperate fully.

17. Final Loan Approval/Final Underwritings

The underwriter very carefully reviews all the documents provided and cross checks underwriting guidelines to make sure everything is in perfect order.

18. Commitment Letter/Written Statement of Loan Approval

This may or may not be required. Most sellers request that you have a written statement of full mortgage approval at some point before the closing. This Commitment Letter states the terms upon which the lender has agreed to with regard to your loan.

19. Closing Disclosure reviewed and signed

This is a five-page form that provides all the details about the mortgage loan, including loan terms, monthly payments, fees and other costs. You will receive this document three business days prior to closing your loan.

20. Closing documents are prepared

At this time, the mortgage company will prepare all the final closing documents and send those to the title company.

21. Title Company

Title Company closer walks the borrowers through loan disclosures and notarizes the signatures.

22. Attending the closing

You sign the final loan documents and receive the keys to your new house. You will need to bring a cashier’s check or wire the funds for closing directly to the title company.

For more detailed information about the mortgage process, be sure to watch my FREE homebuyer education videos today! 

Still Have Questions? Call Me!

I am Patty McLain and I have been helping home buyers, first-timers and otherwise throughout the Twin Cities and Greater Minnesota get the financing they need since 1991.

If you have questions about the mortgage process I welcome you to reach out to me. You may contact me online or you can call me at 763-390-7252.