How to Help Smooth Out the Mortgage Process
Mortgage interest rates fluctuate frequently, and when they are low people often jump at the chance to refinance their current rate or to buy a home. Many people become frustrated by the length and complexity of the loan process, which involves submitting documents, playing the waiting game, being asked for more documents, and waiting some more. Saving money can be worth the time and effort put in to receive a low rate on a mortgage, but remember that time and effort will be involved. The good news is that there are ways you can help speed things up and make the whole transaction less stressful overall. Here are some tips to help smooth out the loan process from start to finish.
Prepare and do some research first
Make sure your credit is in order (get that score up!) and keep your debt in check. Low credit scores and high debt are the two main reasons mortgage lenders deny refinance applications, so getting those managed can save you a lot of time. If you are buying a house, you can get pre-qualified through a lender to get an idea of how much money you will need to borrow. Once you’ve chosen a home, made an offer, and gotten through the home inspection, you can make a final decision on your lender.
After you figure out how much house you can afford (there are many mortgage calculator tools available online), what type of loan you want (fixed-rate, adjustable-rate, interest-only, or government-guaranteed mortgages such as VA or FHA), and/or how much money you want to put down for your down payment, you can contact several lenders and shop around. Look for low rates and closing costs while shopping. When you are serious about buying a home, you will need to submit asset and income documentation to the lender in order to be pre-approved for a loan. This is an important step in the homebuying process that can prove that you are financially qualified and show realtors that you are serious when making an offer.
Be diligent, yet patient with the process
This is easier said than done, for sure. However, there are many eyes and hands involved in the loan process. It helps to know a little bit about the process and what to expect. After you select a lender, you will need to fill out a full mortgage application. Your file will go from the loan officer (who will assist with your application and evaluate your creditworthiness) to underwriting (who will decide whether to accept your application and what conditions are needed for approval) to processing (who will review, gather, and submit your paperwork), and finally to closing (who will assemble and prepare closing documents and balance final numbers with the title company), not necessarily in that order.
Files often go back and forth between departments — particularly underwriting and processing — and there are many pieces of the mortgage puzzle that need to come together. Keep in mind that lenders have many loans in the pipeline at once and are also waiting on other parties (i.e. appraisers, homeowner’s associations, insurance companies, title companies, etc.). It can be frustrating if you do not know what is going on behind the scenes, but checking in for updates occasionally (i.e. weekly, not daily!) and providing documents promptly should be sufficient to keep up with the status of your file.
Pause all major financial activities until after closing
Many people apply for credit cards, buy new cars, change jobs, open new bank accounts, pay off large debts, and more during the loan process. The best time to do things that affect your credit and finances, if possible, is after your loan is approved and closed. If you want the process to be quick and smooth, avoid doing anything that will significantly impact your credit until the final loan papers are signed. If you absolutely need to do something that will affect your credit or debt-to-income ratio, or DTI, make sure to inform your lender ahead of time.
Mortgage companies will pull your credit at the beginning of the loan process and will also do a “soft pull” toward the end. They will see all inquiries and new debts. They will ask to see documentation, such as statements, for any new debts obtained and a letter of explanation for new credit inquiries. They want to make sure that any new debts do not adversely impact your DTI and that you still qualify. Another thing to avoid doing is moving large amounts of money around, as underwriters will want to see sources of large deposits and transfers (such as a copy of a check or a bank statement showing the money being withdrawn) and you will end up providing even more documents.
Pay attention to detail
If you are not normally a detail-oriented person, now is the time to become one (or to at least try your best or enlist the help of another). Pay attention to the requests you receive from your loan officer and loan processor, as they will ask you for the items that underwriting wants to see in order to approve your loan. For example, if you are asked for all pages of a bank statement, then be sure to send ALL pages, and do not black out any information or alter the statements. Be as responsive and transparent as possible. Also be prepared to send updated documents, such as paystubs, throughout the process.
Sometimes people feel uneasy sharing all of their personal and financial information with mortgage lenders, but lenders look at sensitive information all day, so unless the company is completely fraudulent (which you should be aware of if you did your research), you should be safe to send whatever is requested through the lender’s secure system. Keep in mind, mortgage companies are lending you hundreds of thousands of dollars, and they have to follow all guidelines and procedures to a T.
Although it may not seem like it during the waiting game, your mortgage lender is working hard to get your loan approved. After all, if a loan application is declined, a lender does not make any money from it. However, lenders still have to make sure to follow strict rules and regulations to avoid fines. The government clamped down hard after the housing crisis in 2009 and underwriting guidelines became more stringent. Mortgage professionals must be diligent, slowing down the process overall, and the pandemic only made requirements stricter.
Keeping your finances stable, avoiding new debts, and being prompt and thorough can all help your file move from origination to closing much faster. Do not hesitate to let your loan officer and real estate agent be your guides, and keep open communication with your processor if possible. Check your email and voicemail often, and respond promptly. Hopefully these tips can help you be better prepared and more equipped to get through the mortgage loan process so that you can enjoy your new home or lower rate sooner rather than later.