PSI Virginia Real Estate Practice Exam

Which of the following is the first step in the lending process?

1. Lending application submission

2. Morgtage Pre-Approval

3. Loan processing

4. Closing the loan

The correct answer is: Morgtage Pre-Approval

The first step in the lending process is mortgage pre-approval. Before any applications or processing can begin, the borrower typically seeks to understand how much they can afford to borrow. During the pre-approval stage, the lender evaluates the borrower's financial situation, including credit history, income, and debts, to determine the maximum loan amount and the interest rate they would qualify for. This step is crucial because it sets the stage for the entire lending process; it helps the borrower gauge their purchasing power and narrows down their property search. Lending application submission follows once the borrower has determined their budget through pre-approval. Loan processing involves the lender gathering necessary documentation and underwriting the loan, while closing the loan is the final step where all the agreements are finalized, and funds are disbursed. Each of these steps builds upon the foundation established during the mortgage pre-approval process, highlighting its significance as the starting point in securing a loan.