What Happens Between Home Loan Underwriting & Closing?

Once you submit your mortgage loan application, the underwriting process begins. Underwriters work for the mortgage loan companies and evaluate your mortgage loan application, credit report and supporting documentation and approve or deny your loan based on guidelines established by the mortgage lender. If the underwriter approves your loan, in most cases, you will receive a conditional approval requiring you to submit additional documentation prior to closing.

The Underwriter

The underwriter ultimately will approve or deny your mortgage loan application. The underwriter assesses your information based on the credit criteria established by the lending institution. After verifying information in your application, credit profile and supporting documentation, the underwriter will evaluate an independent appraisal of the home you want to use as collateral for the mortgage loan. The underwriter uses the appraisal to ascertain a value for the underlying collateral. Additionally, the underwriter will examine a title search of the collateral property to verify that the property is free and clear of any liens.

The Closing

During the closing of your mortgage loan, you will sign your loan documents and pay any closing costs or required down payment. In most cases, the closing will occur at an attorney's office or at the offices of a title company. At the closing, you should verify that the actual closing costs of your loan match the closing costs that appear on the Good Faith Estimate provided by your mortgage lender when you initially applied for your mortgage loan. The Good Faith Estimate itemises all costs associated with your mortgage loan. Lenders must issue updated Good Faith Estimates if any of the terms associated with your mortgage loan change prior to closing.

Between Underwriting and Final Approval

After underwriting and before closing, you will generally have to submit additional information to the mortgage lender as required by your conditional loan approval. This additional information may include pay stubs, W-2 forms, explanation letters for adverse items that appear on your credit report, lien releases for any liens that appear on a title search or copies of your bank statements. Since every loan application is unique, the specifics of your conditional approval will vary depending on your specific situation.

Between Final Approval and Closing

Your final loan approval removes all conditions from your loan approval. Lenders call this final approval a clear to close. Once the underwriter issues the clear to close, the lender will generally prepare your loan closing documents. The lender then sends these closing documents to the attorney's office or the office of the title company where the closing will take place. The attorney or title company will schedule a closing date and time with you. At this scheduled date and time, you will sign the loan documents in the presence of a loan notary who will notarise the relevant pages of the loan documents.

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About the Author

Brian Bass has written about accountancy-related topics and accounting trends for "Account Today." He works as a senior auditor specializing in manufacturing and financial services companies for one of the Big 5 accounting firms. Bass hold a master's degree in accounting from the University of Utah.

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