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Mortgage Process Timeline From Application To Closing

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Mortgage Process Timeline From Application To Closing

This BLOG On Mortgage Process Timeline From Application To Closing Was UPDATED On December 12th, 2018

There is a mortgage process timeline.

The mortgage process is a process. There are steps in the mortgage process.

  • Once you have decided to get a mortgage, whether it is a home purchase or refinancing current home, there are several stages in the mortgage process and it takes time
  • The first step in the mortgage process is getting pre-approved
  • The pre-approval stage of the mortgage process is the most important stage of the whole mortgage process
  • The main and most common reason of mortgage loan denials is because borrower was not properly qualified
  • The pre-approval of borrower was not thoroughly done by the mortgage loan originator

Stages Of Mortgage Process

There are many moving parts in the pre-approval process and most pre-approvals will take some time.

  • Just obtaining borrower’s credit scores and having borrower complete a formal mortgage loan application is not sufficient in getting pre-approved
  • The mortgage loan originator needs to thoroughly review the borrower’s income and credit profile
  • The following should be carefully reviewed:
    • credit report
    • review not just the paycheck stubs but also do a full analysis of borrower’s income tax returns
    • make sure that they analyze the unreimbursed expenses
    • If the borrower is self employed, the mortgage loan originator needs to carefully review both corporate and individual income tax returns

Income And Employment Analysis

If borrower has multiple jobs and irregular income such as part time jobs, bonus income, or other income, the mortgage loan originator needs to make sure to have two year work history:

  • Make sure that the income and job is likely continue for the next three years
  • A verification of employment is strongly recommended for borrowers who have questionable or irregular hours and/or income

Interviewing And Qualifying Borrowers

The loan originator should interview the borrower:

  • Make sure that they go over the borrower’s credit report
  • Make sure that all line items on the borrower’s credit report is correct
  • Check for any derogatory credit items such as public records like judgments and tax liens are not reporting on the borrower’s credit report
  • Public records such as judgments or tax liens that are not reporting on the borrower’s credit report will be revealed
  • Public records gets discovered when lenders does a third party national public records search such as Core Logic and/or Lexis Nexis

Reviewing Credit Reports And Public Records

Public records such as bankruptcies and foreclosures should be carefully reviewed:

  • The actual dates of the bankruptcy and/or foreclosure should be analyzed by the loan officer
  • Not just rely on the borrower’s credit report
  • Credit reporting agencies are not always correct
  • Errors are made on borrower’s credit reports
  • There are mandatory waiting periods to qualify for a home loan after a bankruptcy and foreclosure
  • With foreclosures and deed in lieu of foreclosures, the waiting period clock does not start until the date where the deed of the property has been transferred out of the homeowners name:
    • Needs to go into the name of lender and/or the date of the sheriff’s sale

Noting Important Public Records Dates

Many folks think that the waiting period starts when the homeowner turns in the keys to their property to the mortgage lender and that is not the case.

  • Most pre-approvals can be issued as soon as the mortgage loan applicant can provide the following documents:
    • two years tax returns
    • two years W2s
    • most recent paycheck stubs
    • other pertinent documents relating to the mortgage loan officer’s ability to render a decision
  • The quicker a mortgage loan borrower can provide the necessary documents to the mortgage loan officer, the pre-approval letter should be issued

Mortgage Process Timeline On Processing

Once a home buyer is armed with a solid pre-approval letter, he or she can now go and enter into a purchase real estate contract.

  • Once the home buyer gets a seller to agree on a home purchase offer, the home buyer will submit the real estate purchase contract to their mortgage loan officer
  • This is when the mortgage process timeline starts
  • The loan originator will request updated docs by the borrower such as updated bank statements and updated paycheck stubs:
    • Will email out the mortgage loan disclosures and the Loan Estimate

Importance Of Mortgage Disclosures

Once the mortgage borrower acknowledges the mortgage loan disclosures and sign the wet docs, the mortgage file gets assigned to a mortgage loan processor.

  • The mortgage processor will then make sure that the file is complete
  • Processor will get the file ready for submission to the mortgage company’s underwriting department
  • The mortgage file gets assigned to a mortgage underwriter where the underwriter will go over every aspect of the file
  • Underwriters will make sure borrower meets all of lending guidelines
  • The processing of a file may take up to one week
  • Depends on how fast borrower gets documents that are requested by processor
  • The following documents are required:
    • bank statements
    • child support payments
    • divorce decree
    • bankruptcy paperwork
    • foreclosure and/or short sale documents
    • other pertinent information

The processor’s role is to make sure that the file is as complete as possible so the mortgage underwriter will come back with as little conditions as possible. A great processor will scrutinize a file and will make the mortgage underwriter’s job very easy. The underwriter will come back with very little amount of conditions

Mortgage Underwriting Process And Conditional Loan Approval

A mortgage underwriter normally can underwrite a mortgage file within 24 to 48 hours from the time the file is submitted by processing.

  • The mortgage underwriter will then issue a conditional mortgage approval where there will be a list of conditions
  • Examples of conditions includes appraisal, updated documents, and other prior to funding conditions
  • Once the conditions are submitted back to the mortgage underwriter
  • The underwriter will then issue a clear to close

Clear To Close And Home Loan Closing

A clear to close, also often referred to as a CTC, is when the mortgage lender is ready to fund the mortgage loan and wire the funds to the title company to close on the home loan.

The mortgage process timeline should take no later than 30 days from the day the mortgage borrower or borrowers submit all of the necessary docs and sign the mortgage loan disclosures. Delays in the mortgage process timeline does happen

Typical reasons for delays in the mortgage process timeline is due to the borrower not cooperating. Not submitting the requested documents in a timely manner are reasons for delays in home closings. Other reasons for delays in home loan closings is due to  home appraisal issues. There are times where the home appraisal does not come in at value and the lender needs to do an appraisal rebuttal, or other extraordinary reasons.

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