Posted August 27, 2014Tweet
How many days does it take to get a mortgage approved? Fewer than it used to.
As mortgage rates have dropped this year, so have mortgage processing times. Data from Ellie Mae shows that U.S. lenders now need just 38 days, on average, to close on a home purchase.
It's a noteworthy stat for today's U.S. home buyers. Mortgage rate locks of 46 days or longer incur higher costs.
The U.S. housing market is in recovery, driven mostly by demand for homes which has outpaced supply of homes. Buyers are competing hard, and many have offered "quick closings" to potential sellers to make their purchase offer stand-out.
"Quick closings", though, are difficult to define. You tend to know a quick closing when you're in one.
Typically, quick closings are characterized by buyers having less time to get a mortgage approved; having less time to scour the home inspection; and, having less time to review and study a final settlement statement.
A quick closing may be a closing scheduled for 30 days or fewer from the signing date; or, one which must completed before the end of the month.
To get a quick closing, though, you'll want to check with your lender first. Not all banks can accommodate.
According to mortgage origination software firm Ellie Mae, banks required an average of 38 days to process, approve and fund a purchase loan in July. This is down from forty-two days from June.
It's also equal to the fewest days required to close on a purchase loan since Ellie Mae started collecting such data three years ago.
Yet, 38 days to close a loan is far too many days to be considered a "quick close".
If you're buying a home and need to minimize your days-to-close, then, consider these helpful behaviors. Your loan can be approved in fewer days, and you may even get access to a lower mortgage rate and APR.
For buyers who want to close quickly on a loan, it's important to understand that several loan factors will be beyond your control.
For example, a buyer cannot control how fast a home appraisal is performed because home appraisals requires cooperation from the seller. Additionally, a buyer cannot you control the speed at which a title search is performed by a title company.
That said, there are concrete actions you can take to make sure your loan gets approved without delays and as fast as humanly possible. The most action is to be prepared.
It's no secret. Mortgage lenders like paperwork. When you're buying a home, you'll want to be prepared with the most commonly-required verification documents. This can include W-2 statements and federal tax returns from the last 2 years; your two most recent paystubs; and your last two bank statements. You should also have a copy of your drivers license handy, as well as the social security numbers of everyone whose name will be listed on the mortgage.
Furthermore, if you know you have a unique credit situation such as a recent short sale or foreclosure; child support or alimony payments; or gift funds from a relative, have the relevant, related documentation ready.
This "gathering paperwork" step can be the most time-consuming one in the mortgage approval process. You know you're going to need the documents. Consider scanning them and having them ready in advance. This can save days off your approval time and help you reach your closing more quickly.
Be honest and open with your lender -- even if you worry that you'll harm your approval. There are two reasons for this.
The first reason is that withholding information from your mortgage application can constitute loan fraud, which is a far worse outcome than not getting your home loan approved. The second reason is that your mortgage lender will typically uncover what you're electing to "hide" anyway.
As part of the mortgage approval process, a credit check is performed and various "occupancy tests" are conducted by an underwriter. Employers are contacted to verify job status and public records are sometimes checked as part of the approval.
With so many mortgage programs available for today's home buyers -- from large-downpayment to low-downpayment to 100% financing -- the more information you share with your lender, the more equipped he'll be to help you close quickly.
For a buyer, mortgage pre-approvals are among the most under-used tools to speed a purchase closing. Home buyers with pre-approvals in-hand at the time of offer can typically reduce closing times by one week or more. It's because of the role which a pre-approval plays to a lender.
Mortgage pre-approvals are "dry runs"; approvals based on an expected set of loan criteria which will eventually go to closing. During the pre-approval process, your lender will take a complete loan application which includes performing an income and asset verification, and he will account for specific loan traits which may affect your final approval such as your personal credit scores, any required child support payments, and the availability of a co-signer, as examples.
In fact, when a pre-approval is issued, the only missing item is often the physical property address of the home being purchase. To compensate, lenders use dummy information based on probable loan data including a sample purchase price, a sample real estate tax bill, and a sample homeowners insurance policy and/or homeowners association assessment, where applicable.
With their loan "pre-approved", buyers can move immediately from the "Writing The Contract Phase" to the "Underwriting The Loan Phase". This can save 7 days or more days from the approval process.
Mortgage rates have been steadily dropping since the New Year. 30-year rates are their low point for 2014, and have dropped to their best levels since June of last year. For today's active buyers, purchasing power is high.
Get started with a rate quote now. Rates are available for free online with no social security number required to get started and no obligation to proceed.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2014 Conforming & FHA Loan Limits
Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.