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  Mortgage Basics   Chapter 5: Underwriting
Here's what happens while you wait for closing day.



Once your loan has been approved, the clock starts ticking to closing day. Much remains to be done during those few weeks, and most of it occurs behind the scenes.

You can help speed the process by:

Here's what's happening while you wait:

Underwriting verification
Your lender's team of underwriters springs into action, verifying the information on your application and supporting documents. They will call your employer, for instance, to verify that you work in the job and at the salary stated on your application. The amount of verification involved depends on how risky your lender perceives you to be.

Your lender will require an independent appraisal of the property prior to closing, the outcome of which could affect the rate and terms of your mortgage. The work will be done by a licensed appraiser, who will arrive at an expert's estimated value of the property based on physical inspection and a sampling of comparables or "comps" -- prices paid for comparable properties that have recently sold in the neighborhood. Cost of an appraisal typically runs between $300 and $500.

Title search and title insurance
Your lender doesn't want to lend money against a house that may have claims or other encumbrances upon it. That's why a title company performs a title search.

The title company will go to the county courthouse and research the history of the property, looking for encumbrances such as mortgages, claims, liens, easement rights, zoning ordinances, pending legal action, unpaid taxes and restrictive covenants. The title insurer then issues a policy that guarantees the accuracy of the work. Your lender will require a title policy that protects the lender. In some cases two policies are issued, one to protect the lender and one to protect the property owner.

Flood certification
Lenders also want to know whether the property you're buying is in a flood-prone area. They will hire a vendor to analyze your property and neighboring sites to determine if it's in a flood zone; their report is called a flood certification. If the answer is yes, you'll be required to buy flood insurance because most standard homeowners' policies don't cover damage from rising water.

Some lenders also will require that a home's property lines be verified by a professional survey.

-- Posted: May 1, 2006
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