Mortgage Closing Process And Steps Leading To Clear To Close

This Article Is About The Mortgage Closing Process And Steps Leading To Clear To Close

The pre-approval stage of the mortgage process is the most important part of the overall mortgage process. The number one reason for mortgage loans to have stress and/or delays in getting a clear to close is because the loan officer did not properly qualify the borrower. A loan officer should take his or her time in qualifying the borrower and make sure the pre-approval letter is solid. In this article, we will discuss and cover the mortgage closing process and the steps leading to a CTC.

The Mortgage Loan Process

Today, the mortgage process is much shorter and easier than it used a few years ago. Every lender has their own mortgage process, however, most lenders have the same tasks they need to accomplish leading every file to mortgage closing:

• The timeline of the mortgage process is dependent on how complete the mortgage application package is when it is submitted to underwriting
• Experienced mortgage processors will not submit the mortgage application package to underwriting if it is missing pertinent information
• All docs should be complete

Examples of docs that needed to be scrubbed and prepped are the following:

• 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 alimony and/or child support documents
• letters of explanations

By submitting copies of the above, I mean complete copies and not partial paperwork. For example, lenders want to see all pages of bank statements, including blank pages, and not just the page where it just state the balance.

Mortgage Processing Leading To Mortgage Closing

Experienced processors should also review the 60 days of bank statements and make sure to see if the mortgage loan applicant does not have any overdrafts. If the underwriter catches a bank overdraft in the prior 60 days of bank statements, it can be a loan denial. In cases of bank overdrafts, the mortgage 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. It needs to be addressed prior to being submitted to underwriting. This is 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 From Loan Application To Mortgage Closing

I have closed mortgage loans in 12 days. However, most mortgage closings take at least 30 days. It can go beyond the 30-day mark if the borrower is slow in providing conditions and documents requested by underwriters. Statistics from Ellie Mae states that the average mortgage lender in the United States take 40 days to close a home loan.

Mortgage Closing

Every lender works at 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 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 underwriters reviewing re-submitted conditions. For example, say a full mortgage loan application gets submitted to underwriting and the mortgage loan applicant gets conditional approval. Conditional approval is a mortgage 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 few conditions as possible and possibly no conditions.

Conditions On Conditional Loan Approval

The reason there are mortgage conditions is due to not submitting all the required documents that the mortgage underwriter can possibly need all at once.

• Both the mortgage originator and processor needs to make sure the application is processed and all possible documents and/or letters of explanations are provided to eliminate as few 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
• This 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 says there are 20 conditions, the processor will wait until all of those 20 conditions are provided by the borrower and/or others and submit it all at once.

Submitting Mortgage Conditions For CTC

It takes anywhere between 48 hours and 72 hours for an underwriter to review conditions. The underwriter will either get a clear to close or kick the file back to the processor stating that he or she is still missing conditions.

• If the underwriter kicks the file back stating that all conditions are not met, then the processor needs to gather the additional conditions and documents that are still missing and needs to re-submit
• 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 does not get cleared
• Many times, mortgage underwriters will add more conditions that were not listed on the first mortgage conditions list

Mortgage closing delays do 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 complete docs to the mortgage 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. The 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 the 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.