Current mortgage rates continue to defy forecasts, and remain below 4 percent. Mortgage rates are so low, in fact, that the “Should I buy or should I rent” debate has changed for many U.S. consumers. It used to be less expensive to rent a home than to own one. Today, however, in many U.S. markets, that’s no longer the case. Rents are rising quickly and mortgage rates are not. As another plus for homeownership, it’s getting easier to get approved for a mortgage. Not only are mortgage lenders approving more purchase and refinance loans than during any period this decade, but there is a growing number of low- and no-down payment programs for today’s first-time and repeat buyers to use; and for investors to use, as well. The widespread availability of low- and no-down payment loans, plus rising approval rates, plus today’s low mortgage rates, have spawned an environment where buyers outnumber sellers; and where demand for U.S. homes exceeds the available supply. It’s a seller’s market, for sure. The best-prepared buyer, then, will be the one most likely to get the house, especially when the seller requests a “quick closing”.
If you’re able to close on a home in 45 days or fewer, you can improve your chances of getting a home. And, if you can close in thirty days or fewer, you really increase your chances. Closing in 30 days or fewer is possible (and it may even get you access to a lower mortgage rate from your lender). However, to be ready to close in 30 days, you better be prepared. Here are a few ways to speed your way to a quick closing.
When you go to buy a home, typically, the “longest” part of the transaction is the part during which the mortgage lender makes documentation requests of you; and you respond to them. Mortgage lenders in Tampa Bay will tell you that this step of the process can be completed in as little as 30 minutes. But, often, it can take two weeks or more. It all depends on what paperwork’s being requested.
As a homebuyer, though, you can be prepared for your lender’s request. You can ask ahead of time what’s needed, then pre-gather the required documentation. Most lenders will even accept scans. If you can be ready for what your lender needs, you can reduce the total number of days required to get your approval dramatically; and can get your loan approved ASAP. Your lender will remind you of this often. There are other tricks for a quick closing, too, and most are linked to “being prepared”. The homebuyers who are the most prepared will typically be the ones who can close on their home the fastest.
It’s no secret. Mortgage lenders like paperwork. When you’re buying a home, you’ll want to be prepared with the most commonly required verification documents. Common paperwork includes W-2 statements and federal tax returns from the last 2 years; your two most recent paystubs; and your last two bank statements. You should also have a copy of your driver’s license handy, as well as the social security numbers of everyone whose name will be listed on the mortgage. Furthermore, if you know you have a unique credit situation such as a recent short sale or foreclosure; child support or alimony payments; or gift funds from a relative, have the relevant, related documentation ready. This “gathering paperwork” step can be the most time-consuming one in the mortgage approval process and you know you’re going to need the documents. Consider scanning them somewhere and having them ready in advance. This can save days off your approval time and help you reach your quick closing.
Be honest and open with your lender, even if you worry that you’ll harm your approval. There are two reasons for this. The first reason is that withholding information from your mortgage application can constitute loan fraud, which is a far worse outcome than not getting your home loan approved. The second reason is that your mortgage lender will typically uncover what you’re electing to “hide” anyway.
This is because, as part of the mortgage approval process:
- A credit check is performed which lists your creditors, debts, and judgments, if any;
- An occupancy test is conducted by an underwriter to determine whether you really live where you say you do
- An employment check is done to verify your job status and income.
Public records are scoured, too, just in case the above checks fail to include information the lender would need as part of your approval. Using all of this information, should a mortgage underwriter uncover inconsistencies between your home loan application and the supplemental data gathered, it will ask you to explain the discrepancy in detail and your loan may be denied as a result. Just know that your lender will uncover whatever information you elect to withhold, so share everything.
For a buyer, mortgage pre-approvals are among the most under-used tools to speed a purchase closing. Homebuyers with pre-approvals already in-hand as of the date of offer can typically reduce loan closing times by one week or more. This is possible because of the role, which a pre-approval plays to a lender. Mortgage pre-approvals are “dry runs”; approvals based on an expected set of loan criteria which will eventually go to a quick closing closing.
During the pre-approval process, your lender will take a complete loan application which includes performing an income and asset verification, and he will account for specific loan traits which may affect your final approval such as your personal credit scores, any required child support payments, and the availability of a co-signer, as examples. In fact, when a pre-approval is issued, about the only missing item is often the physical property address of the home being purchase.
To compensate for this lack of “real address”, lenders use dummy information based on probable loan data including sample purchase prices, sample real estate tax bills common for the area, and sample homeowner’s insurance policies and/or homeowners association assessments, where applicable. With a loan is “pre-approved”, a buyer can move immediately from the “Writing The Contract” to the “Underwriting The Loan”. This can save 7 days or more days from the approval process.
Mortgage rates are low and rents are expected to rise for the next few years, at least. If you’re planning to buy a home, the timing may be right. Just remember that you can improve your home offer with a just little bit of prep.
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