When It Comes To Borrowing, Patience Is A Virtue
These days, perhaps more than ever, having patience is most definitely a virtue. And from where I’m standing, nowhere is patience needed more than when you apply for a mortgage loan. Whether you’re looking to purchase a home or refinance your home, being a borrower in today’s market may make even the most tolerant among us lose our cool. But that doesn’t mean you should shy away from purchasing or refinancing. Interest rates are still historically low and home prices are more or less stable. Instead, what it means is that you should be prepared for your loan approval and funding to take at least a month and you should expect curveballs to be thrown your way during the process.
The first thing to prepare for is the fact that, online, you may see interest rates that are absolutely incredible. However, what the fine print may or may not explain is that those rates apply to 15 day lock-ins for borrowers with very high credit scores and a lot of equity. This sounds great at first glance, of course, except for the fact that it is next to impossible to fund a loan in 15 days especially given the changes in the lending industry.
The reasons these quick turnaround loans are impossible are many. First, new rules mandate that before you can be charged for an appraisal on your home you must acknowledge and sign certain disclosures. This means you must receive and understand your Truth in Lending Statement and your Good Faith Estimate (GFE) before the appraisal takes place at your expense.
The new GFEs have become incredibly confusing. If you’re purchasing a home for example, some seller’s costs will be included (which as the buyer you’re not responsible for). This makes your closing costs look higher than they actually are. They are also confusing as they do not include your monthly property taxes, insurance or any HOA fees. You need to make sure you understand your GFE before signing. Obviously, signing immediately for your receipt of these becomes problematic if you need time to sit down with your mortgage professional to clarify (which we highly recommend).
The next delay that might occur is with the appraisal itself. It can take days for the appraiser to view the property. Moreover, unless your agent is there to educate them on comparable sales in the area where you’re buying, the appraisal may come back grossly inaccurate. It is important to note that your mortgage professional is not permitted to select your appraiser. Appraisers are randomly selected from a panel and, unfortunately, your mortgage professional can’t guarantee that the appraiser is from your area or even familiar with your area. Nor can we guarantee that the appraiser selected will be the most experienced available. That’s why you’ll need to rely on your REALTOR® to ensure that your appointed appraiser is professionally educated about home prices and sales in your area as an inaccurate appraisal will certainly present another delay.
Next, you need to be prepared that the lender will request copies of almost everything except your first-born. Your income tax returns, pay stubs, investment account statements, bank statements and proof of any other income you have will be required. My advice to prevent delays during this stage is to have copies of everything ready before you apply for your loan.
Finally, whatever you do, don’t make a big purchase on credit anywhere near the time that you’re applying for a mortgage loan. The lender will run your credit right before the close of escrow and a debt appearing during the escrow period may lower your score or cause your overall debt to increase which, in turn, can throw off the approval. Don’t get us wrong, it’s a great time to buy a home or refinance, just do yourself a big favor and prepare for the process to take a minimum of 30 days. Prepare your documents before applying for a loan. And remember, your mortgage professional wants to close your loan for you as quickly and seamlessly as you, so we’ll do everything in our power to move the process along, as expediently as is reasonably possible. Happy house hunting!