How long does the loan process take? - The length of time between when you apply for a mortgage and when you get the funds for your home can vary widely depending on many factors.
For purchases, generally sales contracts are written with a closing date set about 30 days out. Most purchase loans can be completed in 30 days. Often, if all of you numbers are good, such as credit score, debt-to-income, loan-to-value, etc., purchase loans can be completed much faster. Conversely, if your numbers and documentation are not so good, these loans can take longer.
There are unforeseen problems that can arise with purchase transactions and delay the process. If the home inspector finds problems with the property that is being purchased the lender may require the repairs to be made before the loan can close. the appraisal can also come under review by the lender and have to be adjusted by the appraiser to deal with certain objections the lender may have with the appraisal.
Refinance transactions can typically close faster than a purchase transaction. In a purchase transaction you must deal with the buyer and seller and their agents and the involved parties. In a refinance transaction it is you, your broker, lender, closing agent and appraiser.
There is definitely no set time-line as to how long purchase transactions and refinance transactions take from start to finish. However, refinance transactions are normally, considerably quicker than purchase transaction. There are many different variables that go into how long a loan takes to close. Refinances can be done in ideal situation as quickly as a couple of days but normally take anywhere from 10-14 days on average. Purchase transactions again can sometimes be done very quickly, however 30 days is the normal time of a purchase due to the sales contract.
For refinance transactions here are just a few examples of items that can cause delays:
* appraiser being backed up with a lot of business
* Appraiser not being able to find a convenient time for you to be home for the appraiser to come out and appraise the home
* Lender is not satisfied with the appraisal and requires a new one to be completed
* Appraised value coming in lower than expected and this could change the entire parameters of the loan and cause a change in lender
* Something showing up on title that was not known (such as a judgment, lien, etc...)
* Lender and/or Title Company being backed up with closings and not being able to schedule your closing for a few extra days
* End of a month is typically a busy time for lenders and this can cause delays if you are trying to close at the end of a month
* Your loan is randomly selected for a quality assurance audit before it can close
* Problem with the loan and the underwriter catches something not previously discovered and needs extra documentation
* Technology problems (computers go down, information lost, fax problems, etc...)
* Fraudulent information by the borrower is discovered in a file
* More information is requested by the underwriter (such as Bankruptcy papers, divorce decree, Verification of Employment, etc...)
* Application for a mortgage is not accepted as is by the lender and a counter-offer is issued
* Consumer changes loan information (such as home loan program, term of loan, type of loan, etc...)
For Purchase transactions most of the same items as in refinances can cause delays and additionally these can cause delays also:
* Seller backs out of the contract
* Purchase agreement states loan can not close until a certain date
* Seller and buyer take weeks or even longer to agree upon purchase price
* Appraisal does not come in at purchase agreement price and seller won't lower sale price
* Title company is slow or gets changed
* Problems with title not being clear
* Realtor not on top of things or leaves to go out of town and no one else can help you with the file until the Realtor gets back
* Changes or addendum's to purchase agreement
* Delays in Home Inspection
* Problems with home inspection and repair work that needs to be done
* FHA financing is being used and seller refuses to make appropriate repairs or takes a long time to complete them
* FHA financing generally takes longer than conventional financing
* Credit issues need to be cleared up before the bank will allow the financing
* Down payment and/or closing cost money(s) are not seasoned
* Timing for seller/buyer and the sellers and buyers of their homes does not work out well
* Needing to wait for down-payment money to come in from the sale of your current home
* Problems arise in the "11th hour" and closing is delayed
In cases where the subject property of the purchase or refinance transaction is a cooperative, the financing process can take significantly longer. Lending banks require that the coop management and coop board to provide certain signed documents prior to settlement. Depending on the efficiency of the coop management, this extra step can add weeks to the mortgage process.
If you are refinancing rather than purchasing do not forget the Right of Rescission period. This is a federally mandated three day waiting period between the time your refinance closes and when it actually funds.
The Underwriting Process - The underwriting process occurs when a new loan file is submitted to a lender. They look at every detail of the loan to see if it is an acceptable risk. Afterward, they deny the loan of offer a conditional approval.
The underwriting process is when you will be asked to gather additional information for your mortgage professional. Often times they will submit a loan, and the underwriter will ask for more documentation on certain items. Do not be alarmed, this is a very common process.
After you have applied for your home loan with a loan officer your loan officer will prepare a package to provide that underwriter your loan application. A good loan officer will put the package of your application together in a very clean, clear way that the underwriter knows exactly what you are looking to do with your refinance or home purchase. Therefore, the next step after you deal with a loan officer is for your file to be sent to an underwriter and be underwritten. An underwriter is a key part of the loan process. The underwriter can make or break a loan and generally has the authority to deny a loan that he/she does not feel comfortable signing off on. The underwriter will look at every loan application and document submitted and make sure addresses match up, income seems reasonable and is well verified, appraisal report is acceptable, social security numbers and dates of birth match up, names and addresses are filled in completely and accurately, loan application is filled out 100% completely and accurately. The underwriter may condition the loan officer for items that he/she feels are deficient or not acceptable to the lenders standards.
The underwriter has the ability to approve or deny your loan application. They act as quality control agents for the lender and there main job is to spot potential problems in a loan file that may cause the company to lose money.
Topics that will reviewed by an underwriter are commonly : borrowers credit file, rent history, bank account and asset information, appraisal and title of the home.
Often your mortgage advisor can explain a situation that is not evident to the underwriter in such a way that the problems are removed without you doing anything.
In recent years, loans are mostly underwritten with automated systems. Underwriters main function nowadays is to confirm that the information entered are accurate, to clear approval conditions, and to ensure the deliverability on the secondary market.
Speed Up The Mortgage Process - Once complete, your application will be given to a processor in the mortgage company who will organize your paperwork and may verify your employment, bank balances, and other information. Be sure to respond promptly to requests for information while processing is taking place.
Another part of the mortgage process that can be time consuming is the appraisal. Once the appraisal has been ordered by your mortgage broker or their processor, the appraiser will contact you to make an appointment. The faster you respond to the call from the appraiser and the earlier you can set the appointment the faster the process will go.
It is important to always answer the phone or respond promtly when somebody is calling in connection with your new loan. They may only have to ask a simple question, but the process could be held up until they get the answer.
To speed up the mortgage process it helps for a client to be prepared. Do not pack up all of your financial documents when you are getting ready to move to a new home. Believe it or not this happens many times and important documents that may be requested have been packed up already and can't be found. So therefore, be prepared have all of your income documents, mortgage related documents, bankruptcy papers (if applicable), divorce papers (if applicable), proof of collections or debts being paid, etc.... in one spot that is easily accessible in case anything is needed by your mortgage professional.
One of the most important things you can do is to get your mortgage broker the items they request as soon as possible. Sometimes waiting even one day can make or break meeting a closing date. Remember you and your mortgage broker are a team working for the same end result.
Your loan will take plenty of time to close as is, that is why it is so important for you to do everything possible to speed up the process. If you are purchasing a new home, your loan will fund on the same day. If you are refinancing, you need to remmeber that there is a 3 day right of recission period. This makes the loan process a little longer, but is in place to protect you in case you decide that the new loan is of little or no benefit to you.
When an underwiter requests more information, your loan application will usually just sit until that information is received.
It is important to get that requested item to your mortgage professional or processor as soon as possible. Sometimes busy underwriters will only check their fax machine once a day.
So if a document is requested on Monday and it is not on the fax machine when the underwriter checks at 8:00am Tuesday, your application will sit until they check again Wednesday morning.
Two days can be lost waiting for 1 piece of paper.