Mortgage Rates Are Lower Than Expected
The housing market has been strong this year, with home sales topping 5 million units on an annualized basis for the last six months.
It’s a streak unequaled in two years, and the market for next year may run even hotter.
According to the National Association of Home Builders, sentiment among members is at its highest point in a decade based on an increase in buyer foot traffic and the general availability of for today’s active buyers.
It also helps that are below four percent — lower than where the experts predicted they be as 2015 enters its fourth quarter.
This is a big deal to buyers of homes because more than two-thirds will use a mortgage to finance their purchase.
Today’s rates are the lowest they’ve been in 6 months.
What Is A Mortgage?
For first-time buyers — and even some seasoned ones — the understanding of what a “mortgage” is can be elusive.
Perhaps, a mortgage is best described as a loan which gives a home buyer the ability to buy a home. The technical definition, though, is a little more deep.
A mortgage is not the loan for the home, per se, but the interest in the home that the buyer gives to the bank in exchange for the loan.
This is why the mortgage is retired when the loan gets paid-in-full. The loan is no longer needed, so the mortgage isn’t, either.
Nationwide, this year, roughly two-thirds of home buyers have used mortgages when purchasing a home. And, because buying a home is a time-sensitive process, a popular question among home buyers is related to how much time it takes to get a mortgage approved.
Truly, there’s no “textbook” answer to this question. The amount of time it takes to get a loan will vary. However, the majority of lenders will close a loan in roughly the same amount of time.
In most cases, a buyer’s mortgage can be approved within 30-45 days of application.
The “Average” Loan Closes In 45 Days
According to Ellie Mae, a mortgage software company whose software helps to process more than 3.5 million mortgage applications annually, it takes 45 days, on average, to close a purchase money mortgage.
This is up from an average forty-one days for all of last year, and puts buyers in a precarious position regarding rate locks.
Loans that close in than loans which close in forty-six. So, if at all possible, you want to close your mortgage loan before that extra day hits. You have .
As for why loans take 45 days to close right now, on average, there are several reasons and each relates to the mortgage approval process.
For example, mortgage applicants are required to provide paperwork to their lender in support of an approval, including proof of income via tax returns and W-2s; proof of assets via bank statements and retirement accounts; and, support for derogatory items on a credit report.
Gathering this sort of paperwork can sometimes take minutes and, other times, take days.
Having a home appraisal ordered and completed also takes days.
The home appraiser may not be available to inspect immediately and may not have capacity to deliver a report within a few days of inspection — especially if the property is somewhat unique and requires extra research.
The appraiser’s job is to assign a fair market value to the home. That process can take up to a week and, in extreme cases, it can take even longer that.
Plus, from time to time, there are issues with appraisals that can delay the report’s delivery even further, which slows the buyer’s mortgage approval.
The Role Of The Mortgage Underwriter
Once a mortgage applicant’s paperwork are received by the bank, and once the appraisal is completed, the loan’s merits must be evaluated by the lender’s underwriter.
The job of the “underwriter” is to verify that the applicant’s loan application meets the minimum standards of the loan program’s guidelines.
For example, guidelines for the VA mortgage program require the borrower to have a minimum credit score of 620; and guidelines for the program require the home buyer to live in the home for which financing is sought.
One of the first tasks of the underwriter is to confirm that income and asset documentation is complete and “sufficient”.
Should anything be missing or in need of additional clarification — and there always is — days can be added to the underwriting process, depending on how quickly the underwriter can review your file and, also, how quickly you can submit the additional required paperwork.
However, sometimes, requests are made to parties external to the transaction, such as when your employer is asked to confirm your employment.
Again, this can take hours, or days, depending on the speed of everyone involved.
Lastly, recent government regulation has added potential delays to the mortgage approval process.
Under a law known as TRID, mortgage lenders are required to give applicants [post-link post=“18242” linktext=“a 72-hour “review period”"] for all required closing documents, including those which list loan terms and closing costs.
This mandatory review period didn’t exist prior to October 2015, which means that today’s loan closings may take an additional three days to close beyond the time required in loan underwriting.
If you want to close faster, the best course of action is to be prepared for your loan with a pre-approval; and to be diligent about replying to underwriter requests.
Mortgage lenders can close in 30 days or fewer when buyers are prepared.
What Are Today’s Mortgage Rates?
When shopping around for a lender for your home financing needs, be sure to ask them what their average time is for getting a mortgage approval. If the lender promises an approval within 1 week, be cautious. If the lender say 2 months, be cautious as well!
Take a look at today’s real mortgage rates now. Your social security number is not required to get started, and all quotes come with instant access to your live credit scores.