The Mortgage Verification Process
Get an overview of the verification process for mortgage lenders and discover how automating the process can help make it easier for everyone.
Mortgage Verification Steps for Lenders
Here's a quick summary of a standard mortgage origination process. Please note that these steps may vary by lender and borrower. Any request and use of The Work Number® consumer report data must be in accordance with the Fair Credit Reporting Act and with permissible purpose.
A prequalification provides an estimate of how much home a consumer may be able to afford, and a preapproval, generally, takes it another step further by verifying the financial information a consumer submits to get a more accurate amount.
The first step in applying for a mortgage loan is often to fill out a Uniform Residential Loan Application (URLA)(Fannie Mae Form 1003). This is a joint document approved by the Federal Home Finance Agency for use by lenders with the intent to sell a closed loan to one of the government-sponsored enterprises. It is a standardized document used by lenders to help determine creditworthiness of a loan.
Once a consumer has submitted his or her application, a loan processor will gather and organize necessary documents for the mortgage underwriter. This will generally include the verification of the information provided within the application.
A valuation of the property is often required to help confirm that the home’s value aligns with the purchase price. Getting a valuation protects both the buyer and lender by helping to ensure borrowers only pay what the home is worth.
5. Title Search
Title insurance and homeowners insurance are measures that help protect the investment. A title search helps to ensure there are no liens, claims, unpaid taxes, judgments, or, in some instances, unpaid Homeowners Association (HOA) dues on the property. Once the title search is complete, the title insurer will issue an insurance policy to guarantee the accuracy of the research and insure the title evidencing ownership rights in the real property. Lenders will typically require title insurance to protect their interest (i.e., lender’s title insurance), and borrowers may also purchase a title insurance policy to protect their title rights (i.e., owner’s title insurance). Homeowners insurance helps protect the borrower’s home, or real property, from covered losses and damage and is a different type of insurance than title insurance. Proof of homeowners insurance will also typically be required of the homeowner by the lender.
6. Underwriting Approval/Denial
A mortgage underwriter is the person who approves or denies a consumer’s loan. They look at a variety of factors like the three C’s of underwriting—credit, capacity, and collateral. An underwriter will usually either approve, deny, or place the consumer’s application in pending status. Approved: A consumer may get a “clear-to-close” right away. The consumer and the lender may schedule closing. Denied: There are many reasons for the denial of an application. Having too much debt, a low credit score, or other reasons may contribute. Decision pending: If a consumer does not provide enough information for the underwriter to do a thorough evaluation,e.g., employment or income cannot be verified, the underwriter may suspend the application for an allowed regulatory timeframe.
After receiving the clear-to-close, the lender will provide the Closing Disclosure to the borrower at least three (3) days prior to closing. This document outlines the terms and costs of the mortgage loan, including the estimated monthly payment. At closing, the consumer will sign the final paperwork and pay any closing costs that may be due.
The Benefits of a Streamlined Process for Lenders and Borrowers
While the loan origination process has remained generally the same for some time, digital solutions from The Work Number® can help make the experience easier for lenders and borrowers. See how the two compare to each other.
Paper-Based Consumer-Reliant Verification Process
Verification of records through written and/or verbal communications
Verification of employment and other information can take days or weeks
Physical paperwork to store and manage
The need to manually enter or copy and paste information into forms
Sensitive financial data can be put at risk
Automated Cloud-Based Verification Process
Verifies with frictionless digital access to employment and income information
Fast-tracks the mortgage application with instantaneous verifications
Flow paperless documentation effortlessly through the process
Streamline the data entry process with help from automation
Protects applicant data through stringent security standards