Mortgage Approval Process
The mortgage approval process starts with the pre-approval phase. A home buyer goes to a mortgage lender first to see what the maximum amount of loan he or she can qualify for. Once the mortgage loan officer determines the maximum amount of loan the home buyer qualifies for, the home buyer can then consult a realtor and start looking for a home within the range that the home buyer qualifies for. An experienced mortgage loan officer will give a home buyer a solid pre-approval after reviewing the home buyer’s income, debt, assets, credit, and credit history. For self employed home loan borrowers or 1099 wage earners, most mortgage loan originators will not issue a pre-approval until the loan officer has reviewed two years tax returns to make sure that the borrower has positive income and did not write off too much on their tax returns. The loan officer will also ask about the down payment and closing costs and where those funds will come from. For those home buyers who have limited assets and just enough for the down payment and cannot afford to pay closing costs, the loan officer will ask the home buyer to make sure that they get a sellers concession towards the home buyer’s closing costs. In the event if the seller is not willing to give a sellers concession towards a home buyer’s closing costs, the mortgage lender can give the home loan borrower a 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.
Mortgage Application Process
Once the home buyer is issued a pre-approval and is 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: https://gustancho.com/documents-required-process-loan/. The items on this list should not be sent piece meal. 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 and provides it to the mortgage loan officer, the mortgage loan originator will prepare a formal mortgage application and disclosures for the mortgage loan applicant to sign and send back. The signed mortgage application and disclosures then gets assigned to a mortgage loan processor where 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 where I make it a point to get a mortgage application package processed in 24 hours. Once the mortgage loan application 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 mortgage loan processor orders the appraisal which normally takes between 3 to 5 business days unless a rush appraisal is ordered which then it 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 loan processor requests conditions from the mortgage loan applicant so by the time the appraisal comes back, all conditions will be at the mortgage loan processor’s desk to submit along with the appraisal for final review and a clear to close. Once the appraisal and final conditions are submitted for the clear to close, it normally takes 24 to 48 hours for the mortgage loan underwriter to review the final conditions and issue a clear to close. Once we get a clear to close, it takes 24 hours to prepare docs, including final HUD, and wire and to close and fund the mortgage loan.
Why Do I Hear Horror Stories About Mortgage Loans Closing In 2 To 3 Or More Months?
There is no reason why a mortgage loan cannot close in 30 days or less. There are unexpected delays sometimes but 90% of all of my mortgage loan applications close on time and we get a clear to close in 30 days or less. As mentioned earlier, banks, credit unions, and larger mortgage companies have a system and do take longer. Once a file is ready to be processed, it goes to a bin and gets in line for the processor to get to it. First come, first serve, If there are missing documents and/or items, it gets kicked back until the item is provided for and goes back on the bin again on a first come first serve basis, Sometimes, this can take several days to a week or more. Same process when it goes to underwriting. If an underwriter sees that several pages are missing from the mortgage package, then it gets kicked back to processing and the processor notified the loan officer which in turn the loan officer notifies the home loan borrower. Once the borrower provides the necessary information, then it gets submitted to the processor which in turn gets submitted to the underwriter where it will lay there on a first come first serve basis. This is how a mortgage loan closing gets delayed.
Mortgage Loan Closing Delays
There are other situations where it is beyond anybody’s control where a mortgage loan 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 needs 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 the mortgage loan borrower has 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, the mortgage loan applicant needs to chip in and make sure when conditions are requested, that they provide it in a timely manner. The list of items requested the first go around should be as complete as possible. If the mortgage loan processor does not turn in all of the required documents the first go around, the mortgage loan underwriter will condition it on the conditional approval which means delays can occur. Most seasoned veteran mortgage loan processors will not submit a mortgage file to underwriting until every single document has been provided by the mortgage loan applicant.
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