Banks handle mortgage loans through a structured process involving credit assessment, property evaluation, underwriting, closing, and post-closing servicing. First, applicants submit financial documents for credit checks, income verification, and debt-to-income ratio analysis. Banks then appraise the property to ensure its value covers the loan amount. Underwriters review all materials to approve or deny the application. Approved loans proceed to closing, where legal and financial documents are finalized, and funds are disbursed. Banks retain servicing rights for payments and collections.

The structured process ensures risk mitigation and regulatory compliance. Credit checks minimize defaults, with 25% of U.S. mortgages denied due to poor credit scores (Federal Reserve, 2023). Property appraisals prevent overvaluation risks, reducing loan-to-value ratios to 80-95% (Fannie Mae, 2022). Underwriting verifies stable income, with 60% of loans requiring 24 months of consecutive pay stubs (MBA, 2023). Closing costs average 5-6% of the loan amount, covering title insurance, origination fees, and legal services (CRL, 2023). Regulatory requirements like the TILA-RESPA Integrated Disclosure (TRID) mandate transparency, reducing post-closing disputes by 18% (FHFA, 2022). Post-closing servicing generates 0.5-1.2% annual revenue per loan, supporting long-term profitability. This system balances risk control with customer accessibility, enabling banks to offer mortgages to 90% of qualified applicants (FHFA, 2023).