Before You Can Close On A Home: What’s The Lender Doing?

By Author: Brian Eber
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The process of buying a home is a long one. For many families and individuals, it starts months before hand with the preapproval and shopping process. When you get ready to make an offer on a home and actually apply for a mortgage, the preapproval process will take a lot of time out of your wait. Either way, though, you’ll still have some waiting to do. Here’s what’s going on while you wait to close on your new home.
Underwriting: The lender is basically using an underwriting team to verify that everything you’ve put on your application is correct. The riskier you are for them to lend a mortgage to, the longer and more in-depth this process will be. If you’re already preapproved for a loan, some of the underwriting process might already be done. However, if it’s been a while between applying for preapproval and applying for an actual loan, you may have to wait for the process – or at least parts of it – to happen all over again.
Title Search and Title Insurance: Neither you nor your lender wants to deal with problems on your home’s title. For instance, you can be responsible for back taxes on a ...
... property if they’re attached to the title. All sorts of problems can and do happen with homes that haven’t had a title search performed on them.
Basically, a title search team will go to the county clerk’s office to find all the records they can on your home. If they don’t find any problems, they’ll guarantee that for your lender. They’ll provide title insurance, so that they’ll pay if problems arise that they missed in a search that wasn’t thorough enough. You may also want to get a title insurance policy to protect yourself.
Appraisal: You’ve probably already had the home inspected before you put in a firm offer. Your lender will probably hire an independent appraiser, though. This person will use comparable home sales in your area and a thorough inspection of the home to determine whether the asking price is fair or not. If you’re getting a home for less than it’s actually worth, your loan terms might improve. If you’re paying more for the property than it appraises for, you may get worse loan terms or actually get turned down for the loan.
Flood Certification and Insurance: Lenders have a vested interest in making sure your home is insured, which is why they require you to carry homeowners insurance. Homeowners insurance policies don’t cover flooding, though. Your lender may have your home inspected to make sure that it isn’t likely to flood. If floods could be a problem, you’ll be required to purchase separate flood insurance.
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