How The Overall Mortgage Lending Process Works From Start To Finish

Looking for that perfect house can be an exhausting and exhilarating process in itself, as you search for that exact property in the right neighborhood, for the right price. Then applying for a mortgage for that home isn’t exactly nearly as much fun.

How the mortgage lending industry works.

The Mortgage Lending Process
So you have finally saved up that big chunk of money and stuffed it under your mattress, and are ready to clunk it down on a down payment for that dream home. You have already began shopping for a home or have already found that perfect house. It’s now time to enter the world of mortgage financing. So before entering the labyrinth, it may help to find out how the mortgage process and the lending industry works.

A mortgage simply is a financial debt instrument that will act to secure a loan for you to get that home. In exchange for that money, the mortgage lender will first put up a lien on the prospective property for the loan amount. If you happen to default on the monthly payments, the lender will be able to foreclose and have the right to sell the home to recover the debt amount.

For the mortgage lending industry, when you apply for a mortgage, it is known as ‘originating’ a loan. To originate the mortgage loan, you will initially have to find a financial lender you are comfortable with, and they comfortable with you. You may have already established a close relationship with a financial institution or bank, and that should suffice. Many others however, find it a better idea to just deal with a mortgage broker who will shop for the best loan that meets your specific needs and situation. Different lenders will often offer different terms and loans.

As part of the ‘originating’ process, you’ll be required to fill out a lengthy loan application form. Depending on the exact nature of the loan, you will probably also be required to submit additional documentation that supports your household income claims, assets and so on. There are no partial document or document loan applications, but most won’t qualify for them anyways. Once you submit your mortgage application, the lender will inevitably ask you for more information or documentation. Depending on the mortgage lenders review process, known as ‘underwriting’, the lender will then decide to either decline or accept the application. At times, the lender may add stipulations to the loan that will cover issues that they are concerned with.

You Finally Get That Mortgage
Once you are granted that mortgage loan, you are one step closer to finalizing on that piece of property you are after. Most may then be surprised by what happens next. Most often, the mortgage lender who have just given you that loan, will turn around and sell that loan to another entity. This is done in order to raise additional cash to issue more home loans. Mortgage lenders will sell their current mortgage holdings on a secondary market. Your lender may still continue to handle the administration of your loan, but will most often just hand the entire instrument off to the other party.

Your mortgage at some point in the future will be eventually terminated. One reason will be the resale of the home, refinancing the home or just simply you paying off the balance. Other reasons for termination can be defaulting on the loan or bankruptcy. Regardless, this is the basic process and structure of the mortgage lending industry from start to finish.

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