Going after the Home Owner American Dream is still alive and well.
Home ownership is great even if you do have to mow the lawn in the summer, rake the leaves in the fall and shovel the snow in the winter. And don't forget about cleaning out the garage in the spring and chasing the neighbors dog out of your yard at least once a week!
However, recent surveys reveal a couple of major frustrations associated with buying a home. One is all the paperwork involved when applying for a home mortgage and another is the 6 to 8 week wait for underwriting and approval of your home loan after you do all the paperwork.
Well gone are the "wild wild west" lending practices of the old days. Everything is what they call a "full doc" loan. Meaning the banks want every bit of paperwork they can get their hands on to limit their risk.
So under our current financial environment don't hold your breath waiting for a paper work short cut. However you can cut 2-3 weeks off the loan approval process if you know the following little secret.
Why it takes so dang long to get your loan approved
First, let's understand the process of getting a mortgage approved.
As you can imagine it takes more effort and time just to get all the paperwork together before you can even submit your loan to the funding bank. If you have all your ducks in a row though you and your loan officer can get this handled in about a week. (Unless you're like my brother, then it will take three weeks just to find your checkbook and who knows where he put those pesky bank statements!)
Once the paperwork is completed your loan officer will submit your loan application to the funding bank where it gets to go to the end of long line of about three hundred other loan applications that came in before yours.
After about a week waiting in line, your loan application lands in the hands of the funding banks underwriter, the person responsible for making sure everything is up to snuff on your application. Its the underwriters job to make sure there is no irregularities – they are charged with making sure the bank is exposed to the least amount of risk possible when funding your home loan.
So the underwriter goes through your mortgage application with a fine tooth comb and typically sends your loan back to your mortgage broker with "conditions" for approval.
This is where it gets crazy sometimes. Here is what I mean.
Typical and understandable conditions may be to simply verify that you are still employed or that the twenty thousand dollars you showed on your previous bank statement is still there. But there are things you wouldn't necessarily expect to come up that can throw you off. For example, here's a true story that happened just this week ….
One couple had found their dream home in a upscale neighborhood where there existed a Home Owners Association (HOA). The HOA took care of the front yards of all the homes and the common area within the sub division. The problem arose when the underwriter wanted the HOA to carry a $ 2 million dollar liability insurance policy instead of the $ 1 million dollar policy they had.
Yes, the underwriter thought it perfectly acceptable to put it's nose in the HOA's business and require they double the liability amount in the off chance someone tripped and fell in the common area and sued for $ 2 million instead of $ 1 million. Well guess what? Do you think the HOA is going to double their liability insurance so one person can buy a home in their sub division? You're right, they would just snicker at you if you asked them to.
That was just one story. There are hundreds of ridiculous stories just like it. But these are the things that hold your loan up under our current economic conditions.
Let's review … one week to get the paperwork together … one week for the underwriter to come back with conditions … one week or maybe two trying to meet the conditions … that's 4 weeks so far.
So now its back to the drawing board and your loan will have to be submitted to another funding bank. So in your loan goes, only to wait in line again behind the other 300 loans that got there before yours did.
So another week zips by. Now you are up to 5 weeks of waiting. Let's assume that now you've anticipated all the conditions the bank is going to ask you for and easily meet them in a week. Now you're out 6 weeks from the time you started.
Then the silly banks actually want you to get the home appraised to verify the actual market value. I mean they don't want to give you a mortgage if the home you're buying isn't worth more than the loan! (Don't you miss the good ole days where they didn't care whether or not you could actually afford to pay for the home or not?) So the appraisal is going to take another week or more. Guess what? Now you're out 7 weeks.
The Secret To Cutting 2 to 3 Weeks Off Your Mortgage Underwriting Time
OK, are you ready for the little secret that can shave 2-3 weeks off your mortgage underwriting and loan approval time?
It's a two word secret …
Financial Dictionary Definition of Correspondent Bank:
A bank that has limited access to certain financial markets and therefore must use the services of another bank to conduct certain transactions. Correspondent banks are usually small. Agreements with other banks allow it to provide necessary services for account holders without incurring the expense of meeting certain requirements larger banks have already meet.
In other words, they have the money to lend for your mortgage but they may not meet the feds qualifications to hold the mortgage paper for a long period of time. So they make a deal with a larger bank to become their "virtual branch" so they can make underwrite and approve mortgage loans in behalf of the larger bank.
What Does All This Mean?
The way this speeds up your loan approval time is that the corespondent bank, (your loan officer) is doing "in house" underwriting. So you were getting your paperwork done buy the guys that underwrite and approve your mortgage. So once the paperwork is done you're already approved. No one else has to approve you. When your loan officer hands the paper work in its a done deal.
It shows up at the funding bank as an already approved and conditions met loan. And like magic it cuts a couple weeks off your waiting time!
And do take into consideration that, the approval time line for mortgages fluctuates-more people naturally apply for home loans when the interest rate drops, the season makes a difference, and more people move and want to get into homes before the school year begins.