August 23rd, 2012 3:52 PM by Richard T. Cirelli
How Long Does It Take to Process a Loan?
Homebuyers and Homeowners trying to refinance are experiencing longer time frames to get their loans processed and closed. With record low mortgage rates and record high volume for refinances and now purchase transactions too, lenders, appraisers, and escrow companies are all running at a slower pace.
According to a recent survey by Ellie Mae, a leading vendor of mortgage loan processing software used by mortgage brokers and lenders, the average time from application to closing was 48 days in July and has been inching up a little each month. I would expect the August reports to reflect even longer times.
What factors affect the time to process?
The length of time it takes to process a loan can vary greatly. The most significant factors are:
· The time it takes the borrowers to provide their income and asset documentation to the lender
· How quickly the appraiser to make the appointment, inspects the property, researches the comparable sales and complete the report
· Length of time it takes the lender to underwrite the file and issue the approval. Some lenders are taking 30-days to underwrite refinance transactions
· The time it takes the underwriter to clear any approval conditions, prepare closing docs, etc.
· The experience and expertise of the loan originator in identifying and communicating exactly what documentation is required.
What Can You Do to Speed Up the Process?
The best thing that a homebuyer can do is to get pre-approved in advance of making an offer on a property. This entails providing all income and asset documentation up front so there is plenty of time to review it and no delay in providing any missing documentation.
Provide the information requested as quickly as possible. It no secret that lenders today are required to document just about everything. Be prepared to provide proof of income for the past two years including current paystubs, W-2’s, tax returns, bank statements, and a variety of other information.
If purchasing, don’t expect a 30-day close of escrow in this environment. While it’s still possible to close in 30-days, particularly if the borrower was previously pre-approved, everything will need to go almost flawlessly. Remember that the appraisers are independent vendors and the lender can’t control the speed or accuracy of an appraisal. Underwriting and closing times can increase or decrease according to the volume of business that a lender receives each day. Nobody can predict the workload of their selected lender 30-days in advance.
Other Details from the Survey:
% of Loans: Conventional / FHA / Other
67% / 24% / 9%
% of Loans: 30-Yr Fixed Rate / 15-Yr Fixed / ARM
82% / 15% / 3%
Average FICO Score:
Average Debt-to-Income ratio:
% of Loan Applications that Closed:
The good news is that rates are low and home sales are up. Proper planning and good communication can prevent unnecessary delays.