Mortgage Application Process
Today, the mortgage application process is much shorter and easier than it used to be prior to the 2008 financial, banking, credit, and real estate collapse. The time of the mortgage application process is dependent on how complete the mortgage application package is when it is submitted to underwriting. Experienced mortgage loan processors will not submit the mortgage application package to underwriting if it is missing pertinent information such as bank statements, recent paycheck stubs, tax returns, copies of bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale documents, copies of divorce decrees, copies of alinomy and/or child support documents, and letters of explanations. By submitting copies of the above, I mean complete copies and not partial paperwork. For example, mortgage lenders want to see all pages of bank statements, including blank pages, and not just the page of where it just state the balance.
Experienced processors should also review the 60 days of bank statements and make sure to see if the mortgage loan applicant has any overdrafts. If the mortgage underwriter catches a bank overdraft in the prior 60 days of bank statements, it can be a mortgage loan denial. On cases of bank overdrafts, the mortgage application process either needs to wait until that overdraft has a 60 day seasoning or that bank account having the overdraft needs to be pulled out and not be used. There are creative ways of dealing with bank statements with overdrafts but it needs to be addressed prior to being submitted to a mortgage loan underwriter because once an underwriter sees something, it is too late. The ultimate goal is to get a clear to close and get to the mortgage closing. The more complete the mortgage application is, the sooner that we can get to the mortgage closing and fund the loan. How long does it take for the mortgage closing? I have closed mortgage loans in 12 days. However, most mortgage closings take at least 30 days and can go beyond the 30 day mark if the mortgage loan applicant does not cooperate with the mortgage loan originator in getting the conditions and documents requested by the mortgage loan underwriter. Statistics from Ellie Mae states that the average mortgage lender in the United States take 40 days to close a residential mortgage loan.
Every mortgage lender works in different speeds from the time the mortgage loan application is submitted to the time of the mortgage closing. It is extremely rare for me to have a mortgage closing go beyond 30 days from the time I get the signed mortgage loan application from the borrower unless they request a delayed mortgage closing due to moving arrangements or due to the home being a new construction home. However, most banks average 45 days or longer due to the turn times of mortgage loan underwriters reviewing re-submitted conditions. For example, say a full mortgage loan application gets submitted to underwriting and the mortgage loan applicant gets a conditional approval. A conditional approval is a mortgage loan approval if and only if the mortgage conditions requested by the mortgage loan underwriter can be provided. Say there is a list of 20 conditions. An experienced seasoned processor’s mission is to have as little condition as possible and possibly no conditions.
The reason there are mortgage conditions is due to not submitting all the required documents that the mortgage loan underwriter can possibly need all at once. Both the mortgage loan originator and processor needs to make sure that the mortgage loan application is processed and all possible documents and/or letters of explanations are provided to eliminate as little conditions as possible. Almost all mortgage approvals come back with conditions the first time around. Example: Even if the processor were to submit a complete file, the mortgage approval will come back as a conditional mortgage loan approval because the appraisal, title, insurance, are conditions that there is no way the processor could possibly have when the loan application is submitted to underwriting. When the underwriter issues a conditional approval and say there is 20 conditions, an experienced veteran underwriter will wait until all of those 20 conditions are provided by the mortgage loan applicant and/or others and submit it all at once.
Submitting Mortgage Conditions For CTC
The reason being is that it takes anywhere between 48 hour and 72 hours for a mortgage loan underwriter to review conditions and either get a clear to close or kick the file back to the mortgage loan processor stating that he or she is still missing conditions. If the underwrtiter kicks the file back stating that all conditions are not met, then the processor needs to gather the mortgage loan documents that is still missing and needs to re-submit to the mortgage loan underwriter. This again takes another 48 to 72 hours and this is the main reason why a mortgage closing can get delayed. It is not always the processor’s fault why the first go around of conditions do not get cleared. Many times, mortgage underwriters will add more conditions that was not listed on the first mortgage conditions list. Mortgage closing delays due happen and many times, a mortgage closing extension will be required.
Why Do Mortgage Closings Get Delayed?
A mortgage closing can get delayed for many reasons. Not providing mortgage conditions to the mortgage loan underwriter is probably the biggest reason why mortgage closings get delayed. Appraisals are another reason for a mortgage closing delay. If the appraisal comes back at a lower value or the appraiser requests that certain items need to be fixed due to hazard or not meeting HUD’s or Fannie Mae’s guidelines, then extra time is needed. Repairs can take a week or more and so can appraisal rebuttals. A home buyer may get a home inspection done and certain items might need to be corrected in order for the real estate purchase contract to be in full force. This, again, may take a week or weeks to get corrected. Title is another issue. The title search performed by the title insurance company may take longer than normal or there may be a cloud on title and it may take time to get it corrected. This again may cause a delay in mortgage closing. Insurance is another barrier that can affect mortgage closing delays. The insurance provider may need time or request that certain items need to be corrected or added such as an alarm system. This again can cause a delay in closing.