This article covers Mortgage Timeline From Disclosure To Clear To Close
Mortgage Timeline can vary from lender to lenders.
- Larger lenders may have a longer mortgage timeline process than smaller mortgage companies
- In general, if the borrower cooperates with getting mortgage conditions timely when requested by the mortgage processor, the mortgage timeline to close is normally in 30 days or less
- There are times when a mortgage loan file needs to close in less than three weeks and that can be done at Gustan Cho Associates
- The mortgage loan process is a process and every mortgage loan application needs to go through several stages to ultimately get a clear to close
- The clear to close also referred to as CTC, is when the mortgage loan underwriter has signed off on the file and the lender is ready to send out closing docs to the title company and fund the mortgage loan
- The mortgage timeline starts with the pre-approval stage, to the processing stage, to the underwriting stage, to the quality control stage, and then the final closing stage
Mortgage Loan Pre-Approval Stage
The mortgage loan pre-approval stage is the most important part of the mortgage loan process.
- The main reason why borrowers get a last-minute loan denial is not due to the fault of the borrower
- It is because the mortgage loan originator has not qualified the borrower fully prior to issuing the pre-approval letter
- One of the most common reasons why there are delays in mortgage closings is the debt to income ratios not being correctly calculated
- Just looking at the current paycheck stubs and checking the borrower’s credit scores is not enough in pre-qualifying a borrower
Just because a borrower makes $60,000 per year or $5,000 monthly, does not mean that that income can be used as qualified income
Documented And Qualified Income
The mortgage loan originator needs to thoroughly review the borrower’s income tax returns and see if they have any unreimbursed expenses and deduct those write-offs from the borrower’s gross income.
- Mortgage loan officers also need to make sure that part-time income, overtime income, and bonus income is likely to continue for the next three years before they use it as qualified income
- Need to make sure that the other income has not been declining income
- Declining part-time income, overtime income, and bonus income can be rejected by the mortgage underwriter
If the mortgage loan originator is not sure of the income of the borrower, the mortgage loan originator should do a verification of employment prior to issuing a pre-approval letter.
Meeting Conditions Of Conditional Loan Approval
Mortgage loan officers should also carefully review the automated findings and make sure that the automated approval conditions can be met by the borrower.
- For example, just because the automated findings render an approve/eligible per DU Findings does not mean that the borrower will get an automatic loan approval by the mortgage underwriter
- If the automated findings require verification of rent but the borrower has been living rent-free with a family member, this can be an issue with many lenders
- However, Gustan Cho Associates will accept a rent-free letter in lieu of a rental verification if the borrower is living with family members to save money for their down payment
- Many loan officers just submit the mortgage loan file to processing and underwriting without thoroughly reviewing the whole file completely
This will increase the mortgage timeline and definitely cause delays in the mortgage process or a mortgage loan denial.
Conditional Mortgage Loan Approval
Once a mortgage underwriter has reviewed the file and is content with the documents that were submitted, then the underwriter will issue a conditional mortgage approval.
- Conditional loan approval is a loan commitment
- If the borrower can meet all of the conditions that are listed on the conditional mortgage approval, the mortgage underwriter will issue a clear to close
- The sooner the borrower can provide the loan processor all of the conditions on the conditional mortgage loan approval, the quicker the mortgage timeline to close will be
There is no reason why a mortgage loan cannot close in 30 days. The pre-qualification and pre-approval need to be solid and the mortgage loan processor should submit a complete mortgage file. The appraisal should be ordered as soon as the home buyer gets the home inspection report back and when the borrower gets a conditional approval, the loan processor should team up with the borrower and get the conditions as soon as humanly possible.
May 7, 2021 - 3 min read