Loan Processing
Step 1: Property appraisal.
  • Cost approach: Value = Cost of Land + Cost of Replacing Improvement- Depreciation
  • Market Approach: the property value is estimated by the transaction prices of similar properties in the neighborhood
  • Income approach: The property value is a function of income that accrues to it.

    • Value = Gross Monthly Rent * (Est. Value by Market Approach/ Gross Monthly Rent)
Step 2: Analysis of application - A complete analysis of the financial position of the borrower.
  • In this phase, the lender is concerned with the borrower’s ability to make the down payment and monthly payments of the loan, as well as with the accuracy of the financial data provided on the loan application.
  • The lender examines the borrower’s liquid assets, the amount and stability of the borrower’s income relative to housing expense, past credit history of the borrower. The credit report will indicate any failure of the applicant to make timely payments to other creditors.
  • The financial accuracy of the financial data can be verified by independent, third party sources. (Ex: Verification of Deposit, Verification of Employment, 2 yr History of Income)
Step 2: Analysis of application - The disclosure of information required by RESPA, Regulation Z, and ECOA.
  • Within 3 days of receiving the application, the lender provides a Good Faith Estimate which states the cost of the loan over its term and APR of the loan.
Step 3: Submission for Insurance.
  • After the verification of borrower information has been made and there is no major problem, the loan will be submitted for insurance by your underwriter.
  • Information on housing expenses, such as hazard insurance, property taxes, utilities, and maintenance must be included.
  • Information on the borrower’s income assets and liabilities is also included.
Step 4: Loan Closing - lenders will prepare and assemble all legal documents necessary in the jurisdiction to carry out the closing transaction.
  • Title to the property passes from the seller to the buyer.
  • The buyer signs a promissory note which represents the borrower’s promise to repay the loan.
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