The first step in the home buying process should be to meet with a loan officer (mortgage broker) to determine the amount of the loan the buyer qualifies for. Why a loan officer rather than your bank? Because a loan officer can usually find a lower interest rate for the buyer, sometimes as much as 1% lower! The loan officer will shop for low interest rates with various lenders, then select one and submit the application package for approval. With automated underwriting (AU), preliminary approval can be obtained within minutes. Once the process is under way, the loan processor (who works for the mortgage broker) will begin to gather all the necessary documents. One important piece of the package is the property appraisal, which will help determine the loan amount and down payment. The buyer pays (about $350) for an independent appraiser to calculate the value of the property. When application package is as complete as possible, an underwriter (who works for the lender) will look at it in detail and either approve the loan, request more information, or deny the loan.
Note: mortgage brokers don’t necessarily lend money; if they do, they usually sell the loan very soon after it’s obtained. So they may lend money, but they don’t service the loan. The lender is the entity that actually lends the money and takes all the risks associated with the transaction. The average loan changes hands four times in its life.