When it comes to closing a mortgage on time, the key is to thinking backwards. This may sound, well, a little strange; however, it makes sense once you understand how it works.
The first step is to start with the closing date. Typically a consumer will need to sign one to two days prior to the funding date. Mark this on your calendar in bold print. Next on our backwards list is the preparation of closing documents. This should typically be at least a day before signing legal documents. Escrow officers tend to get frustrated when they are expected to miraculously work up their figures instantly while their stressed out customer waits in their lobby. So to all you Loan Officers out there, plan ahead unless you want one of those neat, blue escrow pens sticking out of your cranium at an odd angle. Next on our list is the final approval from the underwriter. Normally you’ll need to receive this two days prior to the documents being ordered for the title company.
Next on our list is the submission for final approval to the underwriter. In my opinion, this is the most important step in the entire process and the one that requires the most expertise on the part of the Loan Officer and/or Processor. It’s a good idea to allow a couple of days for the underwriter to review the items submitted to them and to add a little extra time if the transaction is complicated. Make sure you are submitting a complete package and the underwriter is not getting a smelly pile of rubbish hastily thrown together. Underwriters are your best ally and they will appreciate receiving a package with all issues addressed up front. As a Loan Officer, do everyone a favor and don’t withhold vital information the underwriter needs to make a decision; instead, put together a cover letter and map out your thoughts of why the loan makes sense. Whatever brilliant thoughts and analysis you possess do no one any good if they just stay safe and secure in your noggin.
Typically the last item received prior to the file going to the underwriter is the appraisal. The appraisal itself is normally the item that takes the longest time – it should be ordered as early in the processing of the loan as possible. Once the appraisal is received, the file should be ready to be submitted immediately. The last of our steps is the taking of the application and gathering of documents necessary to verify income, assets and credit. So now we have arrived at the beginning – the time of the initial conversations. Fun ride huh?
I also have a few suggestions for each of the major players in a transaction. To consumers: make sure to provide accurate information up front and gather the needed items requested as quickly as you can. If your Loan Officer has already received the appraisal and you are still scrambling to find bank statements and W-2s you are now officially holding up your own transaction. Another important note: don’t commit fraud. Anything worth doing is worth doing right. As an example, it’s not worth paying less in fees to get an owner occupied rate when you have no intention of living in the property.
To Realtors: make sure you are setting realistic expectations up front. Check with your Loan Officer to find out what types of time frames are realistic. Encourage your customer to provide all needed information as quickly as possible. Inspections are crucial to a transaction but make sure they are done early in the transaction. If the closing date is two weeks away and the appraisal hasn’t been ordered yet due to conflicts with inspectors our chances of closing on time are dwindling.
To Loan Officers: stop saying “yes” when you know the answer is “no.” Understand what represents a good loan and what doesn’t. Ask questions! If something doesn’t make sense have the decency to tell everyone as early as possible. Communicate clearly what items are needed in order for a transaction to have a successful conclusion. Encourage all parties to the transaction to provide the necessary items and documents early in the process. When you do receive information, take the time to review the items received. If you don’t understand what you have been given, ask for clarification.
The next time you are speaking with your Loan Officer and you see them gazing off into the distance with a thoughtful expression on their face, they may be thinking about a vacation in some exotic locale. But more likely, they are thinking backwards and trying to figure out how best to close your transaction on time.
Have a great Thursday.