Processing is when your application is "put through the wringer." In other words, processing is where your application is heavily scrutinized and verified. The information youave during your application, and how truthful you were, will determine how fast the processing stage goes.
When your mortgage goes into the processing stage, your file is handled by a loan processor. It is extremely important for you to know the name and direct phone number of your processor. He or she will have to contact you on several occasions to complete the process.
The first thing that happens in processing is that your basic information is verified. Your name, social security number, current residence, and former residences are checked. When you submit your application, you should include a copy of your driver's license, social security card, and one or two utility bills that help them verify this information. Be careful about the bills you give them, however. You do not want to present a bill that is currently, or was at any point, past due.
Next, they will verify your work information. Place of employment, length of employment, and salary. Sometimes, they will verify this information for previous employers as well. To help speed this part along, you will need to provide a copy of your last 2 years of W2s. They may ask for the last 2 years of tax returns as well. The processor will also need your most current paystub, along with the 2 or 3 before it. When you first filled out your application, it asked for a work phone number. The phone number you saved them was probably your direct number instead of the main office line. Your processor will need both your direct number and the phone number to call to verify your employment with the company. Check your human resources department or your manager for this information. Sometimes, companies will outsource the employment verification process.
If you are self-employed, it is even more important to give accurate and current information. In this case, the processor will need 2 years of tax returns. As well, he or she may want to obtain your profit or loss statements, W9 statements, or 12-24 months of business bank statements. If you have a corporation, you might need to provide your articles of incorporation. If a partnership, you may need to provide any partnership agreements that outline how your revenues are divided.
After verifying your home and work information, the processor will then assist you in scheduling your appraisal. Normally, you are responsible for the appraisal fee. It is either paid to the processor or the appraisers themselves. Often, a lender will allow you to choose your own appraiser. If you opt for your own, make sure that appraiser is fully licensed and accredited. The lender will still have to see the appraisal and do a "desk review." This will determine if the appraisal is legitimate. There have been borrowers who have opted to choose their own appraisers and were burned because the desk review showed a flawed appraisal. In some cases, the appraisal value is inflated, and the desk review will re-value the appraisal. When that happens, the appraised value comes back lower than the original value, and the loan may be denied for lack of equity.
Finally, during the processing stage, your debts are scrutinized. If refinancing, the processor will obtain payoff information for your mortgage and any other debts you want to pay off. It's during this stage that you have some leverage over your lender. Many times, when a payoff is requested, your current mortgage company will try to "upsell" you to keep your business. This is a fantastic opportunity for you to either get a better product from your current lender, or to force your prospective lender to match or beat the current lender's offer.
In order to take full advantage of this leverage, you must be on top of your credit scores. It is imperative that you do not apply for new credit during the processing stage. It is also advisable to check your credit scores to make sure they're as high as possible. By doing so, you will get better rates from both your prospective lender and your current lender.