Understanding the Mortgage Financing Timelines!
When does the mortgage clock starts ticking and what items are critical to closing on time??
Michael Fischer NMLS 658153
Step 1: Pre-approval
After asking a few questions about your income/debts and assets, we will pull a credit report to help determine the home price you can afford. We will then walk you through the items that are critical to price range help you understand the factors the go into your monthly payment and your mortgage loan pre-approval.
Step 2: Finding Your Home
You and your Agent will search online and on the street to find the perfect home for you and your family. As you are looking you are more than welcome to check back in and have us run the numbers on any house you may like prior to making an offer. Your Realtor will assist you in making an offer by writing a contract and ultimately negotiating the terms of the sale. Here’s some info I wrote about how we can help during that process : (click for the article) Put Your Best Foot Forward!!
Step 3: Loan Application (Day 1-2)
Once your offer has been accepted and your contract has been signed by all parties we will either meet to complete the loan application or review through our convenient e-sign portals. If you’re ready, we’ll also review mortgage market options and lock you into an interest rate at this time. Please Note, for our discussion purposes the Loan application day 1 starts when you have committed to moving forward, it does not necessarily start the day you sign your offer or the day the seller signs the offer. This concept is the key to the mortgage timeline; if you negotiate back and forth with a seller or wait a few weeks to apply for a mortgage, it may be difficult to meet your original contract dates without a fair amount of stress.
Step 4: Document Collection (Days 2-4)
For your loan to proceed in a timeline manner, we will help put together a list of any documents not previously sent to us that will need to updated and submitted to us as quickly as possible to aid with the processing of your loan. During this time we will also assign your file to a processor and possibly a production assistant to help us coordinate document collection and mortgage loan file setup for underwriting.
Step 5: Appraisal/Inspection (Days 4-9)
At this point, if you choose, you may obtain a Home Inspection. You may want to check the timelines noted on your contract to make sure the inspection is completed according to contract timelines. If your inspection results do not meet your standards, your agent will help walk you through the options. Once you are satisfied with the results and ready to proceed, we will order an appraisal to determine value. At times it may also be necessary to obtain well, septic, and water tests and possibly a mortgage survey.
Step 6: Approval (Days 10-18)
After our processor receives the necessary supporting application paperwork and receives information from 3rd parties such as employers and government agencies he/she submits your loan to an underwriter for approval.
Step 7: Conditional Approval (Days 18-21)
After the mortgage loan has come back from underwriting it is common for the underwriter to request a little more documentation and will ask for it when he/she delivers the conditional approval. This is a normal part of the loan process. Most commonly items such as evidence of money transfers and deposit checks clearing are requested.
Step 8: Obtain Homeowners’ Insurance (Days 21-23)
Homeowners’ insurance is a very important step in the mortgage timeline because your lender requires it prior to a final approval. Without evidence of homeowners’ insurance, you can’t close on your new home. For your homeowner’s policy to be issued, the company will need important information from both you and the lender. It is a best practice to decide who you will be using early in the process, at this point you will need to have your decision on company set and the contact information for the parties writing the policy. Please remember that the first year premium must be paid in full prior to, or at closing.
Step 9: Clear to Close (Days 24-26)
Once the underwriter has received all 3rd party items (including appraisal) and has the updated conditions we requested from you, your loan file will be submitted for a final approval. If all the conditions have been met he/she will deliver a “Clear to Close.” After we have a clear to close we will typically confirm the date time and location for the closing.
Step 10: HUD 1 Settlement Statement (Days 27-29)
After the clear to close, our closing team works to send out mortgage documents to the Title Company. The Final documents, totals, and statements will be prepared by the Title Company a few days before closing. These statements will give the final amount that you will either need to bring to closing or will receive back from any earnest money that may have been paid. Once we receive a copy of the HUD-1 settlement statement we will forward to you for review. Please note funds to close typically need to be in the form of a certified check or wired to the title company.
Step 11: Closing (Days 30-31)
It typically takes approximately one hour to sign all the documents. Your agent will walk you through any items related to home occupancy and utility transfer. Important Note, in August of 2015, this final step Closing day timeline will be changing based on several regulations coming during the summer of 2015. We will keep you posted on changes that will affect your financing timeline.
Step 12: First Mortgage Payment
Your first mortgage payment will be due on the first of the month one full month after your closing date. For example, if you closed on January 15, your first payment would be due on March 1.
Throughout the Process:
We will keep you updated with email status updates when you move from one step to the next !!
It is not uncommon for timelines to go slightly beyond the timelines in this review. And it is also not uncommon to find that negotiations go smoothly and the closing can occur a few day also. Either way; Clear Communication is really our goal from beginning to end.
Nobody wants a closing delay, but in reality delays do happen on Occasion. While many companies overpromise and under-deliver when it comes to timelines, we strive to give you accurate information and update you constantly with all the details so you can make the best decisions possible for your move!
The most common reasons for extended timelines are: back and forth negotiations over inspection, delay in documents from buyer or from 3rd parties including associations, delayed application, extended time for government backed loan products, and in some markets extended time for appraisal reviews.
**This article is a general overview of the mortgage timeline for the most common conventional mortgage products. It is not intended to be used as a negotiation tool between parties in a real estate contract.
*Please note: These are general guidelines only. Mortgage loans that require third party approval—FHA 203K Renovation, FNMA Homepath, MSHDA Downpayment Assistance, USDA Rural Development—may take longer.
Cell TXT: (734) 395-7797
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Mortgage Loan Originator