The Loan Processing Maze: Let Us Guide You Through

As a real estate investor, navigating the loan process can feel like wandering around a confusing maze. But fear not: Backflip’s End-to-End Processor Melissa Skinner is here with a birds-eye view onto the loan processing journey and the steps that get you from initial application to the closing table.

Loan Processing Milestones

Understanding your loan’s journey is important, and every lender has different terms or strategies for processing. Let’s look at the four core steps commonly used by lenders:

1. Initial Processing: This is where you gather information about yourself or the company you’re using. You’ll submit information and documents, go through a credit check, and/or a background check. The key here is to thoroughly read the directions and ask if you’re curious about why something is needed. It’s best practice to get tasks done sooner rather than later to avoid any last-minute pitfalls that could affect your closing.

2. Initial Review: Once you’ve submitted everything and the processor has what they need, you’ll enter an initial review stage. This stage can be quiet—not to worry— but it could also become a little loud—also not to worry. The goal is always the same: to get you to the finish line. If the processor is asking for a lot of documents or info, keep in mind this is to make final review quicker and more efficient. If it’s quiet, it usually means things are moving along, but it’s a great opportunity to ask how it’s progressing, to make sure things are on track.

3. Final Review: This is where your file will land in the underwriter’s hands. The underwriter will go through your file with a fine-tooth comb to ensure there are no cracks anywhere. They’ll trigger any outstanding items and request updates or documents needed in addition to what you’ve already given. This stage moves much faster than the others, so the quicker you can provide additional information, the quicker you can be clear to close.

4. Clear to Close: Congratulations—you’ve received clear to close and are ready for the closing table! In this step, things are typically happening behind the scenes: Processing is working with the title company, balancing the finances, ensuring all the documents are prepared and ready to be signed. Best practice at this point is to make sure all parties are on the same page, confirming signing date and location with Title.

Timeframe

The time it takes to move through these milestones will vary from lender to lender. When you contact a lender, do ask for their timeline and estimated closing date. For Backflip, for instance, it can take 7 to 14 days, while other lenders require 30 days, so it’s very much based on your lender. Remember that avoidable pitfalls can also delay a closing. Look:

Common Pitfalls in Processing

Here are some common pitfalls that can happen at any milestone in processing:

• Credit: No matter where you apply, you can guarantee you’ll meet a credit check during your loan application . If you already know your estimated score or have had your credit frozen, share those details so any roadblocks can be addressed ahead of time.

• Insufficient or Untraceable Funds: This doesn’t necessarily mean you have no funds, but rather that it’s not cookie cutter, and might require more explanation. If it comes up, provide as much information as possible to the processing/underwriting team to ensure a short delay, not a hard stop. 

• Delaying Tasks: This is one of the biggest pitfalls, but also the easiest one to avoid. If you don’t have time to gather information right away, or are awaiting items from third parties, keep the processor updated so they can accommodate your timeline. If you wait until the last minute to submit everything, you are more likely to delay the review process.

• Poor Communication: Everyone is busy: we processors totally understand that, but try to be available for us when you can. A quick text or an update through the portal keeps the line of communication open. Even just to say there’s no new update. At least processor can update your timeline, and be ready to go once the last documents come in.

Bear in mind, that it’s not just you and the lender that makes the timelines! Here are some other key players:

Who Else is Involved in the Loan Process

• Appraiser: Think of this role in three different stages. There’s the scheduling, the going out to the property and doing the inspection, and then there’s the actual report, where they go back and they put all their information together. Each stage can vary in turnaround time, so getting the appraisal scheduled as soon as possible is important.

• Title Companies: If the appraisal comes back and it hasn’t changed the terms of the loan, the lender reaches out to the title company for the necessary paperwork. The title company now determines the timeline to close, as they review and change documents, and their timeline is out of the lender’s control. But you can still ask us for the latest on the closing timeline.

• Real Estate Agents or Sellers: These parties could be involved if, say, appraisals have come back different than expected and another walkthrough is needed, or an addendum.

• Finance Brokers: If you’re using a broker, stay in touch with them. Brokers often work with a lot of clients at one time so making time to get updates is important just to ensure that your file is moving forward and your documents are getting submitted on time. 

Questions to Ask

We’re always happy for you to ask where you stand in the processing and underwriting process, so you’re always prepared to act. Bring these four winning questions to your call: 

• “Where are we with the title company?”
• “Can you share the status of the appraisal?”
• “What, if any, additional documents can I provide?”
• “What is my timeline for final review?”

By understanding the steps you need to take, the pitfalls to avoid, and the players involved, you can ensure clear communication and a smooth loan processing journey. Remember, a little preparation goes a long way. So, take a deep breath, follow these tips, and get ready to unlock the door to your investment property!

By Melissa Skinner, End-to-End Processor at Backflip. Melissa has four years experience in the field, and is based in Charlotte, NC.

Disclaimer: This article is for informational purposes only and is not legal, financial or investment advice. To obtain advice tailored to your particular circumstances, you should consult a licensed professional advisor.