Mortgage Process Timeline From Application To Closing
This Article Is About Mortgage Process Timeline From Application To Closing
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 for mortgage loan denials is because the borrower was not properly qualified
- The pre-approval of the 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 a 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 to continue for the next three years
- 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 get discovered when lenders do 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 the 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 signs 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
- The 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 the 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 include the 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 do 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 are 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.