Are you frustrated that you’ve locked in awesome mortgage rates and are still waiting to close? What happens if your rate lock expires? Mortgage lenders these days are overwhelmed with demand and many even have 60+ day backlogs. Here are several tips for streamlining your closing to make sure your lock doesn’t expire and avoid losing that great mortgage rate for your next home loan.
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that can save you thousands of dollars on your next home loan.
Mortgage Rates Dip Below 4 Percent
If you can qualify for a home loan to buy or refinance your existing home loan and still haven’t, what are you waiting for? The government estimates there are 3 to 7 million homeowners that cannot qualify for mortgage refinancing alone because they’re underwater and don’t qualify for HARP 2.0. If you’re not one of them what’s your excuse? There are so many programs out there to help lower your payment that the biggest mistake you could make is to simply do nothing.
The problem is that the demand for mortgage refinancing doesn’t just have lenders stretched to capacity but home appraisers and title companies also. Nearly gone is the 30-day close lenders used to brag about. This isn’t to say you can’t close in 30 days, there’s just a lot that needs to happen everyone involved in your mortgage transaction.
How to Close Your Mortgage in 30 Days
Closing your home loan in 30 days means you have to get everyone involved cooperating. There are also government rules you need to be aware of that exist only to slow down your mortgage. One example is the written intent to continue found in your mortgage loan disclosure. If you don’t sign this document your lender cannot continue with your application until it’s signed. The required documents can be found in your disclosure paperwork and need to be signed and returned as quickly as possible.
Another Federal law that you should be aware of is that lenders cannot process your payment for fees until 3 business days have passed from the date of your application. This is going to hold up your appraisal by a minimum of 3 days.
Once your home appraisal has been ordered, assuming you’ve signed permission to inspect if necessary it can take up to seven business days to receive the report. Your appraisal could take longer depending on your home and market. That’s ten days gone and your home loan hasn’t even made it to underwriting.
Get Your Ducks In a Row For Underwriting
All of your paperwork must be complete for your mortgage to finish underwriting and close. Your original application must be signed, the appraisal must be done and accepted by the lender, and all the supporting documentation must be completed. You may be required to give pay stubs, tax returns, w-2s and bank statements as supporting documentation to get your mortgage funded.
Once your application reaches underwriting the closing time depends on how complete your documentation is as well as how long it takes any third-parties to complete their paperwork. These third parties include insurance agents, associations, your HR department at work and mortgage insurance if required.
Underwriting can take as little as 2 business days if all your documentation is complete and there are no complications. If your lender requires more documentation or verification from you adds extra time to the process. In some cases underwriting can take two weeks or longer to complete. Once you’ve cleared underwriting it can still take 2 to 5 days to close if there is a variance, meaning your lender will have to reissue any disclosure that might have changed. After your mortgage is finalized there is a 3 day waiting period before you’re able to close.
Your Right of Rescission for Mortgage Refinancing
If you’re closing on a mortgage refinancing transaction there is an additional cooling off period that comes from your rescission rights. The law provides a 3-day rescission period which allows you to change your mind for any reason and back out of the mortgage. Your mortgage is funded after 3 business days including Saturdays.
All of the steps leading up to closing on your mortgage need to happen without complication in order to close within 30 days. With high mortgage volume it’s becoming more difficult to close within a month. This is another reason I recommend the smaller community-based credit unions. Credit unions tend to offer the lowest fees for things like loan origination and because underwriting is done in house can offer the fastest closing times.
If you’re concerned that you might not be able to close your home loan within a month consider a 45 day rate lock. You might have to pay a fee or accept a higher mortgage rate, usually .125 percent higher, because longer lock periods often come at a higher cost.
Fees Matter More Than Your Rate
Just because you got the lowest mortgage rates doesn’t mean you’re getting the best deal. Overpaying the origination fee or paying unnecessary discount points can wreck the deal you’re getting. If you’re refinancing the test of how good of a deal you’re getting comes from the amount of time it’s going to take to break even recouping your out-of-pocket expenses. If you can’t break even because you overpaid the loan origination fee or other junk fees you’re going to be losing money no matter how great the refinance rates.
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