Mortgage Process Timeline From Application To Closing

Mortgage Process Timeline From Application To Closing

Gustan Cho Associates are mortgage brokers licensed in 48 states

This guide covers the mortgage process timeline from mortgage loan application to closing. There is a mortgage process timeline. The mortgage process timeline 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 your 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 mortgage loan originator did not thoroughly qualify the pre-approval of the borrower. In the following paragraphs, we will cover the mortgage process timeline form application to clear-to-close.

Mortgage Application Process

Once the home buyer is issued a pre-approval and starts shopping for a home, the mortgage loan originator will request needed mortgage documents.

Here is the list of documents that will need to be provided: Documents Required To Process Mortgage.

  • The items on this list should not be sent piecemeal.
  • It should be accumulated all at once and provided to the loan officer.
  • While the home buyer is shopping for a home, the mortgage loan originator can start reviewing the documents and start processing the mortgage loan application.
  • Once the home buyer gets an executed purchase real estate contract, the loan officer will prepare a formal mortgage application and disclosures for borrowers to sign and send back.
  • The signed mortgage application and disclosures then get assigned to a mortgage processor.
  • It takes no more than 24 to 48 hours to process the mortgage package and submitted to underwriting.
  • This is where the delay comes in with larger mortgage lenders.
  • Many banks, credit unions, and larger mortgage companies take them up to two weeks to process a mortgage loan application.
  • Loan Officers should make it a point to get a mortgage application package processed in 24 hours.
  • Once the package is submitted to underwriting, the turnaround time for a conditional approval is 24 hours to 48 hours.
  • After we get the conditional approval, the processor orders the appraisal.
  • This normally takes between 3 to 5 business days.
  • A rush appraisal can be ordered and will take 24 to 48 hours.
  • There is normally a $100 extra fee for a rush appraisal.
  • While waiting for the appraisal to come back, the mortgage processor requests conditions from borrowers.
  • By the time the appraisal comes back, all conditions will be at the mortgage processor’s desk to submit along with the appraisal for final review and a clear to close.

Once the appraisal and final c.onditions are submitted for the clear to close, it normally takes 24 to 48 hours for underwriters to review the final conditions and issue a clear to close Once we get clear to close, it takes 24 hours to prepare docs, including final HUD, and wire and to close and fund the mortgage loan.

Stages of Mortgage Process Timeline

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There are many moving parts in the pre-approval process, and most pre-approvals will take some time. Just obtaining the borrower’s credit scores and having the borrower complete a formal mortgage loan application is not sufficient to get pre-approved. The mortgage loan originator needs to review the borrower’s income and credit profile thoroughly. The following should be carefully reviewed:

  • credit report
  • review not just the paycheck stubs but also do a full analysis of the 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 review both corporate and individual income tax returns carefully.

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 a two-year work history. Make sure that the income and job are likely to continue for the next three years. Verification of employment is strongly recommended for borrowers who have questionable or irregular hours or income.

Interviewing and Qualifying Borrowers

The loan originator should interview the borrower. Make sure that they go over the borrower’s credit report. Ensure all line items on the borrower’s credit report are correct. Check for derogatory credit items, such as public records like judgments and tax liens, that are not reported on the borrower’s credit report. Public records such as judgments or tax liens 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 or Lexis Nexis.

Reviewing Credit Reports and Public Records

Public records such as bankruptcies and foreclosures should be carefully reviewed. The loan officer should analyze the actual dates of the bankruptcy or foreclosure. 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 bankruptcy and foreclosure. With foreclosures and deed-in-lieu foreclosures, the waiting period clock does not start until the property deed has been transferred out of the homeowners’ name. It must go into the lender’s name or the date of the sheriff’s sale.

Noting Important Public Records Dates

Many people think that the waiting period starts when the homeowner turns in the keys to their property to the mortgage lender, but 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 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 Disclosures in the Mortgage Process Timely 

Importance Of Mortgage DisclosuresOnce the mortgage borrower acknowledges the mortgage loan disclosures and signs the wet documents, 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 the borrower meets all of the lending guidelines. The processing of a file may take up to one week. It depends on how fast the borrower gets the documents the processor requests.

Documents Required For Timely Mortgage Process Timeline

The following documents are required:

  • bank statements
  • child support payments
  • divorce decree
  • bankruptcy paperwork
  • foreclosure 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 few conditions as possible. A great processor will scrutinize a file and make the mortgage underwriter’s job easy. The underwriter will come back with very few conditions.

Mortgage Underwriting Process And Conditional Loan Approval

A mortgage underwriter can normally underwrite a mortgage file within 24 to 48 hours from when the file is submitted by processing. The mortgage underwriter will then issue a conditional mortgage approval where there will be a list of conditions. 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 Leading To 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 are due to the borrower not cooperating and not submitting the requested documents on time reasons for delays in home closings. Other reasons for delays in home loan closings are due to home appraisal issues. There are times when the home appraisal does not come in at value, and the lender needs to do an appraisal rebuttal or other extraordinary reasons.

Mortgage Loan Closing Delays

There are other situations where it is beyond anybody’s control where a mortgage closing can get delayed. There are situations where the appraisal comes in at a lower value than the purchase price. In cases like this, an appraisal rebuttal needs to be done and that takes time. If the appraisal rebuttal is not successful, both the home buyer and home seller need to go back to the negotiation table and renegotiate the purchase price.

There are times where providing conditions by the home buyer can take longer than expected. For example, if borrowers have no copies of bankruptcy, foreclosure, or divorce paperwork and ordering them takes time. The mortgage approval process is at a complete halt until the documents can be provided.

Timeline For Clear To Close: 30 Days Or Less

For a mortgage loan application to get a clear to close in 30 days or less, borrowers need to chip in and make sure when conditions are requested, that they provide it in a timely manner. The list of items requested for the first go-around should be as complete as possible. If the processor does not turn in all of the required documents the first go around, the mortgage underwriter will condition it on the conditional approval which means delays can occur. Most seasoned veteran mortgage processors will not submit a mortgage file to underwriting until every single document has been provided by borrowers.

Timeline From Pre-Approval To Clear To Close With Self Employed Borrowers

For self-employed borrowers or 1099 wage earners, most loan originators will not issue a pre-qualification letter until the file has been fully underwritten and signed off by mortgage underwriters. Timeline From Pre-Approval To Clear To Close on self-employed borrowers may take up to 45 days. Loan officers need to fully review the following prior to proceeding self-employed borrowers are moved to processing/underwriting. Two years of tax returns to make sure that the borrower has a positive income. Make sure borrowers did not write off too much on their tax returns.

The loan officer will also ask about the down payment and closing costs. Down payment and closing funds need to be sourced. Homebuyers with limited assets and just enough for the down payment need to be carefully reviewed so there is no stress at the last minute.

For borrowers who cannot afford to pay closing costs, the loan officer will ask the home buyer to make sure that they get a seller’s concession towards the home buyer’s closing costs. In the event, if the seller is not willing to give a seller’s concession towards a home buyer’s closing costs, a lender can offer borrowers’ lender’s credit towards closing costs in lieu of a slightly higher interest rate. Once a pre-approval is issued, the home buyer can consult with a realtor and start shopping for a home.

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