Quick Closings: How to Prepare
There are many reasons in which a buyer would prefer to close a mortgage loan quickly. A fast closing can make your life easier in that you have a smooth and quick transition. Second, quick closings appeal to sellers who are primed and prepared to move. Quick closings also can help borrowers obtain lower mortgage rates if they are able to lock in a rate prior to a rate hike. When you close your mortgage in 30 days or less, you may get a lower mortgage rate than if you extend your mortgage 45 days or more.
The mortgage underwriting process is a bit time-consuming; however, with hard work and advance preparation, you can complete your underwriting process more quickly and efficiently.
Here are few relevant tips that will help you close your mortgage quickly.
Prepare your documents before the process begins
Whether you apply for a FHA down payment assistance loan, a conventional loan with 20 percent down, or another type of loan, borrowers are required to meet “mortgage guidelines” (aka minimum program standards). These requirements include documentation reflecting borrower’s household income per year, assets in his or her bank account, and citizenship records. During the underwriting process, your lender is required to verify all documentation in order to issue a mortgage approval. In addition to the primary documents, lenders will request for you to also supply your last two years of tax returns, W-2s (wage and tax statement), pension award letters, pay stubs, bank statements, investment account statements, and documents which verify your source of funds. A good rule of thumb to remember: No verification, no loan and since you now know that these documents are an essential part of your application process, consider gathering them in advance.
Preview Your Credit Report
The next thing you to do in order to prepare for a quick closing is to review your credit report. Nearly 1-in-4 credit reports are filled with errors which affect borrower’s credit scores adversely. Your primary goal is to identify weaknesses and to remove them before the mortgage underwriting process begins. When you make an appointment with United Financial Counselors, we will have one of our counselors review your report to determine any issues or errors. Knowing your credit score is vital in that it makes it easier to identify and shop for the best loan according to your needs. Just to note, the higher your score, the better your rate will be.
Avoid Certain Life Changes During The Application Process
Lender’s don’t like to approve your loan twice. Therefore, it is advisable to avoid certain life changes which could affect your loan application while it’s in process.
During the initial underwriting process, the underwriters will review your income, assets, and credit scores . At this time they also will order an appraisal and verify your employment .
At the time just before closing, your income, assets, employment, credit, home appraisal and other things are re-reviewed by lenders to confirm nothing has changed and everything is in order. If the underwriters find any changes during the re-reviewing process, your entire loan will be either canceled or re-underwritten from the very beginning.
Examples of ‘material changes’:
- Job change
- Termination of employment
- Change in source of your downpayment
- You make a huge investment, for example, car purchase
- You submit an application for a new credit card
- Purchase of furniture using credit or cash
- You fail to pay bills on time which affect your credit score
- You make huge bank deposits
Should any of the above changes takes place, you need to slow your mortgage approval process.
Be In Contact With The Lender
“Be available” is another good technique to be aware of when trying to close your mortgage loan quickly. At first, when the primary lenders review your documents, they may need to clear issues. These issues include questions about your job, income and other relevant matters; therefore, your availability to quickly answer these questions makes your loan process quicker and efficient. After all, “ borrowers availability” is a fact of lending procedures. Underwriters cannot perform their jobs without borrowers, therefore, you need to be prepared and alert for additional paperwork. Remember, borrowers who “disappear” tend to find their loan application in the bottom of the stack.
Get Live Mortgage Rates
United Financial Counselors will hold your hand throughout the loan approval process and will guide you through each step to close your mortgage more quickly. It is important to speak to your counselor and educate yourself about the current rate so that you can obtain the best rates for you.
Should you be interested in purchasing a home, please give our counselors a call or schedule an appointment on our website. We are happy you wish to learn about the home buying process and we applaud you for reading this blog to educate yourself.