Today’s real estate market moves fast. Time is of the essence if you want a chance at getting your offer accepted.
According to the August 2021 Origination Insight Report by ICE Mortgage Technology, full approval (from the initial offer to the closing table) takes about fifty days. The 50-day statistic applies to purchases – refinances are taking about 43 days to close on average.
Homebuyers can expedite the process and make their offer more attractive to sellers by seeking a pre-approval before shopping for a home. Pre-approval has always been a smart choice for home buyers. In today’s low-inventory market, it’s almost essential. Imagine you are a home seller reading through multiple offers. Lots of great buyers want to purchase your property. Would you select the offer with solid financing or some other offer that may or may not make it to the closing table? You would select the offer with solid financing!
The Basics of Pre-Approval
The typical pre-approval begins with the Uniform Residential Loan Application (URLA). On this form, you’ll be asked to provide information that the underwriter needs. This includes borrower name(s), address(es), employment information, how much money the applicants have saved, and how much is owed each month. The URLA also asks about properties already owned, address history (if you’ve lived at your current location less than two years), and the funds intended for the down payment. You will also answer some questions regarding demographics and military service.
For a pre-approval, much of the information disclosed on the URLA will be assumed true for pre-approval purposes. Documentation, such as recent bank statements and tax forms, will be required at some point before the final approval is issued. You will need to provide your social security number so the lender can pull your credit report. In most cases, a credit score is required before a pre-approval letter can be issued.
When you are fully approved for your loan, the lender will issue a “clear to close.” They will inform you and other parties to the transaction that the loan’s status has transitioned to final approval status. This does not mean that you can close right at that moment. Industry regulations require that a borrower be given certain information at least three days prior to closing.
Possible Delays
Things happen. If your pre-approval is stalled, you may be wondering why it’s taking so long. Following are some of the issues that could slow the mortgage approval process:
Underwriting Conditions Not Met – Common underwriting conditions include explanations for credit issues, proof of an easement, a commitment for homeowner’s insurance, and verification of gift funds. This list is not exhaustive as each loan scenario is unique.
The Property Did Not Appraise as Expected – The subject property is the collateral for the mortgage loan. If the value of the collateral is not sufficient, the lender could decline the loan or require that it be re-underwritten in light of the new information.
Change in Employment Status – Any change in employment status should be reported to the loan officer right away to avoid delays.
Not Enough Reserves Verified – If the borrower’s bank account has decreased in value, or if the borrower has funds that cannot be properly verified, then a capacity issue exists (Capacity is the borrower’s ability to repay the loan).
Credit Pull Reveals New Information – If the new information results in a lower credit score, the initial pre-approval may no longer be valid.
Contingencies Not Met – A common contingency for loan approval would be the closing of the borrower’s existing home by a certain date.
If You Already Made an Offer
In this case, what you’re looking for is just an old-fashioned “approval.” It’s not too late to get the ball rolling, but you’ll need to act fast! If you want to get approved and make it to the closing table without delays, excellent communication is essential. Timely documentation is also important, so prepare bank statements and proof of income before meeting with your loan officer.
Tip: Work With a Great Team
Having a seasoned team of real estate professionals in your corner makes all the difference. Work with a Realtor and Loan Officer you trust. If you’re shopping for a lender, consider Ruoff Mortgage. The experienced team at Ruoff truly makes the process simple so you can from application to the closing table as quickly and stress-free as possible!