Posted June 20, 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 mortgage software firm Ellie Mae shows that lenders needed 40 days, on average, to close an May 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 as a means to make their purchase offer stand-out.
"Quick closings", however, are without a specific definition. You know a quick closing when you're in one.
With a quick closing, there is less time to get a mortgage approved; less time to scour the home inspection; and, less time to prepare for your final settlement. A quick closing may be one of 30 days or fewer; or one which is completed before the end of the month.
For buyers wanting to offer a quick close, though, be sure to check first with your lender. Not all banks can accommodate.
Ellie Mae reports that the time required to process, approve and fund a purchase loan remained at 40 days in May, on average. This means that some banks are closing loan more quickly and others are closing more slowly.
If you're about to buy a home and want to minimize your days-to-close, then, consider follow these helpful behaviors. Your loan can be approved more quickly and you may get access to lower mortgage rates, even.
For buyers wanting to close quickly, note that many loan factors will be beyond your control. For example, you cannot control how fast an appraisal is performed because the appraisal requires the cooperation of the seller; nor can you control how quickly a title search is performed by a title company.
However, there are steps you can take to make sure your loan gets approved as fast as humanly possible. Step one 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 what you share may harm your approval. There are two reasons for this.
The first reason to share is that withholding information from your mortgage application can constitute loan fraud, which is a far worse outcome than not getting mortgage approved. The second reason is that your mortgage lender will often uncover what you're electing not to share 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 no downpayment at all -- 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.
For buyers looking for a quick closing, it can be tough to buy a home in less than 30 days. However, plenty of buyers are doing it. The key is to be prepared and the first step in getting prepared is to get mortgage pre-approved.
Pre-approvals will help strengthen the offer you make a home, and they'll help your mortgage approval go through more quickly. So, get started with a pre-approval today and see how much home for which you'll qualify.
Rates and pre-approvals are available online with no cost or obligation.
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.