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How long does Mortgage Application Process take? Part 2 & 3

Part -2 

Once a mortgage application has been completed, the mortgage loan is prepared for opening. Once again, this is a less than a heroic effort on our part as Lender’s to create ambiguity around the mortgage process. Many borrowers justifiably confuse the term “loan opening” with what is technically known as the “loan closing”: when the borrower becomes both a homeowner and mortgage payment owner! In truth, the loan opening is the formal term given to the moment at which the loan terms are disclosed to the borrower. In most cases, loan opening occurs within five days after the mortgage application has been completed.

The “Initial Loan Disclosure” (aka “Loan Estimate”), as it is formally defined, provides the borrower with key information regarding the loan amount, the payback period (30 years, etc.), the interest rate and other important elements of the mortgage. Most of what is included with the initial loan disclosure package is information pertaining to the consumer’s (or borrower’s) rights. The loan is “opened” with the dual purpose of informing the borrower they are entering into a promise to pay back a loan and begin the formal loan processing activities. At this point in typical mortgage loan proceedings, the borrower can transition focus to fulfilling inspection obligations and other aspects of the purchase transaction. The borrower should anticipate 1 week between application and the loan opening milestone to be completed.

As I mentioned earlier, the home buyer’s involvement with most of the early loan processing activities may be limited in scope. In most cases, your competent and forward-looking loan officer has already procured from you the documentation required to facilitate the loan processor’s role in making sure your application is “complete”. There may be some additional requests for supporting documents from the borrower, such as a recent pay statement or bank statement. But, the majority of the “up-front” documents have likely been satisfied and submitted to your loan officer’s processing team without much ado. What happens next is, without question, exactly what Tom Petty was referring to when he penned The Waiting (“is the hardest part”): the wait for the coveted appraisal inspection and report! Undeniably, one of the more stress-prone periods of the mortgage lending process for buyers, the appraisal inspection usually takes 7 to 14 days complete, depending on the property features. In most (legal) cases, your mortgage loan officer is likely in connect with the appraiser or appraisal management company (AMC) through his underwriter. At the time an appraisal is ordered, a due date is assigned for the appraiser to agree to before accepting the request for the appraisal. In most cases, that is 7 to 10 days from the date the appraiser accepts the appraisal. At the point the appraisal has been provided to the lending team, you can expect to be less than 24 days into the loan process.

Part -3 

Recapping, to this point, we have completed the application, opened the loan, and ordered the appraisal. What follows is the “back half” of the mortgage lending process, and hopefully the most productive! Technically, the underwriting review begins well before the appraisal report has been provided, but we are addressing it as a subsequent “step” in our six-step process. The underwriting review is where the “rubber meets the road” on the mortgage lending journey. The underwriter is the ultimate approver (or denier <gasp!>) of the loan application for the homebuyer. During underwriting, the homebuyer may be asked to provide substantiating evidence supporting their loan eligibility. These requests will typically come from your loan officer or processor and are usually document related in nature. In most cases, the borrower is transparent to the intensity of the underwriting process on the lender’s side, as most of the work involves verifying information pertinent to submitting a “complete” loan package to the investor who will fund the purchase.

Ultimately, the goal of the underwriting process is to issue the “loan commitment”. The loan commitment provides a high level of assurance to the homebuyer, the buyer’s real estate agent and, perhaps most importantly, the seller’s real estate agent that the borrower is considered a “good” applicant to whom the lender is willing to provide the funds for the purchase of their home. This is often referred to as “closing” the loan. The loan commitment will include a statement of the borrower’s creditworthiness, as well as a comprehensive list of the outstanding “conditions” that will need to be satisfied before the loan can close. These conditions will include evidence of an acceptable appraisal report; verification of sufficient funds in the borrower’s account to pay for closing costs and down payment; and other items that the underwriter deems necessary in order to provide the investor with a complete and quality loan file. The loan commitment is typically due 10 to 14 days before closing. Your lender’s processing and underwriting team will ensure they are working towards meeting your loan commitment date.

With the underwriter’s job complete, your lender’s closing department takes the baton in driving your loan package to the closing table, on time and ready for signing. In some cases, there may be additional requests for documents prior to the “clear to close” being issued. But, rest assured, once the closing team is managing your loan, you are in the home stretch! Pre-closing activities are typically concluded in 3 to 5 days and mostly occur between the closing team and the title and abstract company who will be facilitating your closing. You can expect approximately 1 week between the time your clear to close is issued and your closing date.

So, looking at our process “end-to-end”, it should be evident there are a significant number of factors that contribute to how long it takes for your mortgage application to be completed. As we have also learned, the mortgage application is more so a journey than it is an event. Depending on the complexity of your own purchase scenario, it is safe to expect a 30 to the 45-day application cycle. However, as with most things in life, there are scenarios where that cycle may be substantially shortened and possibly even lengthened. Regardless, your knowledge of the process and the timing between major milestones will help prepare you to close on your schedule!

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How long does the Mortgage Application Process take?

PART 1 of a 3 Part Series!

I get asked this one a lot. And, fairly so, as I truly believe we have created an unjustified mystique to the “mortgage process” in this industry. The truth of the matter is that the mortgage application process is relatively simple, predictable and consistent. One common source of confusion that is infrequently distinguished by those of us in the mortgage profession, is the difference between a “pre-qualification” and “mortgage application”. Unfortunately, the two terms are used interchangeably in many real estate transaction circles, but each is its own, distinctive event with very different implications. Since we are primarily discussing the mortgage application process in this article, I will focus on that topic. However, for the sake of differentiating the two, it is important to understand that the primary goal of the “pre-qualification” is to provide a measurable assurance of the buyer’s eligibility for a mortgage to both the buyer and their real estate agent before an offer on a property is submitted. More commonly, the mortgage application will commence after an offer is accepted. We will take a look at the pre-qualification process, in detail, on its own. For now, let’s get into simply defining the mortgage application process.

To start, creating a vision of the steps involved with the mortgage application process will establish a framework we can further define in sequence. The mortgage application process, from the applicant perspective, consists of six steps: completion of the application, opening of the loan, ordering of the appraisal, underwriting review, issuing the loan commitment and final clear-to-close. Each step or “stage gate”, as you may hear them referred to, is characterized by its own set of responsibilities of the lender and the home buyer and clearly defined deliverables so that the process can continue to move forward in the home buyer’s interest. Let’s look at each of these steps in detail, with a focus on making it clearer from the home buying viewpoint.

So, what is a mortgage application? Well, from a technical perspective, it is a formal request for consideration of credit for the purchase of a home for which there will be an associated obligation of payback. Sounds wordy, right? It is. However, it is an important aspect of the mortgage process. One that is wholly controlled by the borrower. Without the borrowers consent to “make application”, the mortgage lender is powerless in her ability to extend a credit determination on the borrower’s behalf. Specifically, there are six attributes of the mortgage application that, as a whole, constitute a complete submission for credit consideration. They are:

1. The Borrower’s Name
2. The Borrower’s Income
3. The Borrower’s Social Security Number
4. The Address of the Property in consideration
5. An estimate of the property value
6. The mortgage amount desired by the Borrower

To be sure, there is more to the mortgage application, as a whole, than the attributes referenced above. Data points such as borrower’s employer, information on assets the Borrower has available to cover the costs of down payment and closing, and the Borrower’s current address are only three of the additional questions your licensed mortgage specialist will ask of you in order to fulfill the data set required by most underwriting professionals in order to fully determine your creditworthiness.