WRITTEN BY DAVID REED
You’d be surprised about how much it takes to get a loan from application status to final approval. There are multiple steps involved and many of these steps can’t be taken unless a previous step has been completed. To help, borrowers can take on some of the load to help streamline the entire process. There are some initial requirements that borrowers must complete without the assistance of anyone else. Applicants are required to complete a loan application. That can be done with the assistance of the loan officer, but most often it’s the sole duty of the borrowers.
Borrowers are also asked to provide certain documentation upfront before the loan gets too much further into the process, like providing paycheck stubs and tax returns, for example. But when it comes to third party services, there are some limitations on what the borrowers can and cannot choose. For certain credit documents, borrowers are not allowed to provide their own credit report. It’s the lender’s job to run credit. That certainly makes sense as to why a borrower can’t provide a separate credit report. The lender orders the credit report as part of the initial package. A credit report and credit scores are one of the first things ordered to see if the loan can be approved as requested.
Lenders provide a Settlement Service Provider List, or SSPL, which lists third party service providers the borrowers can select. Title insurance, for example, is one such service. Lenders can open up title but so too can consumers. Title insurance is indeed insurance and protects interested parties from fraud and previous claims of ownership on the property. States regulate insurance companies so it’s likely that title insurance from one title company to the next will be the same. For areas where the title company also works with a settlement service provider, the title company can also suggest the closing agent. Services that the borrower can order independently of a lender are listed on the initial Loan Estimate.
But the twist with this is the borrower really has no experience selecting one title company over another. Title insurance is a mortgage lender requirement. Lenders order title reports day in and day out. Borrowers rarely, if ever, do. Borrowers can’t order an appraisal. Lenders do that but order an appraisal via an appraisal management company, who then proceeds to order the appraisal from a list of approved appraisers. Borrowers should also choose their own insurance company. Most often it’s the insurance company currently covering other assets such as an automobile policy.
The fact is that while borrowers can choose some third party providers on their own, it’s often best to leave that up to the individual lender. Mortgage loan approvals can have different requirements for different situations and sometimes a full appraisal isn’t even needed. Instead, an automated valuation model is accessed which arrives at an appraised value based upon digital research regarding sales of homes recently sold in the area. It’s the automated approval that dictates whether an automated valuation model, or AVM can be used, or a full appraisal is required.
Lenders establish working relationships with various third party providers. These providers can even hire sales representatives to solicit a lender’s business. While you can order some services on your own, it’s probably best to leave all that to your lender.