November 9th, 2016 8:44 PM by Robin Bain
Anyone who hasn't applied for a mortgage (Purchase – Refinance -Construction Loan) in the last few years is in for a RUDE awakening. It is a brutal process from application to the closing being completed. One should not assume that having good credit and a good Loan To Value gets them a loan. Well it does, IF you have the income to service the debt under the new stringent guidelines as well. All loan decisions start with the ability of the applicant to show sufficient acceptable income to support the monthly payment.
ALL clients should expect, at a minimum, a 45 day process from the day they submit the completed application and ALL requested documents to their Mortgage Originator. Buyers buying a new home or doing a construction loan should tell their Realtor and or Builder to put at least 45 days in the contract, as a time frame to get a mortgage decision, as 30 days is no longer a safe bet. Please insist upon this, it will save you aggravation down the road. Should your loan not close when expected, the regulations require that a minimum of several days to pass and the lender needs to re-disclose new forms to the borrower. NO exceptions. Also, should you close on your home sale in the morning and take your funds to your new home purchase in the afternoon, do NOT assume that closing will take place. Many times this has happened and you then have no home to move into and your furniture is probably on a truck and you will be spending several days and nights in a hotel or with relatives or friends. Be prepared for this to happen. But more important constantly be checking in with your mortgage professional to make sure all conditions are cleared and the loan is cleared to close. I would do this 7 days before settlement of your home sale, if applicable.
Please be prepared to provide ANY information ASAP and be prepared to be constantly asked for additional information. Loans are no longer made on Character, one of the old 5 C's of credit. It is gone. An 800 credit score and putting a large amount of money down on a purchase no longer will guarantee you approval. One MUST show sufficient qualified income to get an approval. I suggest getting a pre-approval from you lender before you go to buy your home. A pre-approval checks your income, credit and assets to make sure all is in order to borrow the amount needed for your purchase. However, this is still no guarantee that the home you are buying will get approved. The appraisal could come in low, there could be title issues, your credit score could change, etc. Also, do NOT apply for any new credit, or increased credit to existing accounts, during the application process and avoid job changes during the process. EVERYTHING should remain the same, financially, from application to closing. Any activity in these areas could change the decision, as they re-verify this information before closing.
Refinances are a little more palatable. The process and the amount of days for a decision are the same, but you do not have to deal with contracts from Realtors or Builders or property issues, etc. And if the loan doesn't close for whatever reason, you still have a roof over your head. If you qualify from an income perspective, the biggest issue will be the appraisal providing enough value to get the funds you need or the lower rate you want. You still need plenty of patience.
Mortgage interest rates you hear advertised are for “A” qualifying clients. ALL mortgage lenders have a grid based upon credit score, Loan to Value, and property type. The higher your credit score and the lower your Loan to Value, the better your rate will be. Cash out refinances are also reviewed differently than a purchase. Cash out pertains to any funds that are not paying off a first mortgage loan. So if you are paying off a line of credit or other debts, or cash for any other reason, this is a cash out refinance. Other obstacles are the self-employed borrower, a rental property or a condo unit. The investment property and condo unit receive more review and a higher rate. ONE rate does not fit all loan requests.
Patience is needed at every step. The key is dealing with an experienced, qualified mortgage originator and a sound organization behind them.