Why can’t we close our mortgage in 30 days?!!

With rates under 4% for quite some time now, the amount of activity in the mortgage world has been vigorous, to say the least.  Home prices coupled with these rates have dramatically increased the number of purchase mortgage applications.  Add in the economic programs of HARP 2.0 and FHA Streamline Refinances and the number elevates to tremendous numbers.

This influx of activity not only has lenders at capacity, but title companies, appraisers and closing attorneys as well.  Closing a mortgage in 30 days isn’t impossible, but it’s rare.  You almost need a “perfect storm.”  You need to be, what I like to call, a “submission friendly” borrower.  The amount of documentation needed to get a mortgage processed is cumbersome, to say the least, both on the part of the borrower AND the lender.  In recent years, the amount of disclosures required for a mortgage application has practically doubled.

A couple of the new disclosures create delays in the process due to their time sensitivity.  A lender is not allowed to order an appraisal until the borrower has provided an intent to move forward with the loan.  This is a disclosure within the application package.  Once this item is signed, then and only then, can the lender order the appraisal though an appraisal management company.   The processing of the payment for this appraisal cannot take place for three days after the intent is signed and the appraiser isn’t going to perform the appraisal until he or she knows they’re getting paid.  Once the appraisal is done, if there are no issues, you’re looking at a 7-10 day window to get the report.  So we’re already into the process by about two weeks.

The “submission friendly” borrower will provide all of the items asked for, such as W-2’s, pay stubs, bank statements, etc.  Anything missing will delay the file from even being looked at by an underwriter.  If there are complete files in line for the underwriter, those will be looked at first.  With the current influx of files coming in, an incomplete file will never be “next.”

Once the file does reach the status of “Clear to Close”, about 15 to 20 days later, the closing department still needs to do their checks and balances.  They need to verify that the APR from the initial application has not changed and that the loan complies with all federal laws to protect the borrower as well as the company.  If any changes are necessary, the file needs to be redisclosed and there is a mandatory three day waiting period.  Preparing the loan for closing generally takes 48 hours.

While it is still possible to close a loan in 30 days, it’s better not to get your hopes up and consider the fact that 30-45 days is the expectation.  It’s a small price to pay for a smoother transaction to secure something that will last 30 years.