In today's competitive housing markets, borrowers breathe easier when their financing is approved and they can set a closing date to complete their purchase of a new home or the refinancing of an existing one.
However, about one out of four settlements today are delayed, and problems with either mortgage approvals or appraisals account for more than half of all delayed settlements. Among the 7 percent of contracts that eventually are cancelled, 31 percent are
cancelled due to problems with financing or with appraisals.
Working with a dedicated and efficient lender like loanDepot is important. There are also steps a borrower can take to help speed up their mortgage approvals. Here are five tips for you to share with your clients (buyers):
1. Get Credit in Order
It takes time and discipline to improve credit. Before getting serious about buying or refinancing a home, credit should be in the best shape possible. A better credit score will speed an application along and lower
the interest rate. However, a potential homebuyer should not break out the plastic once their loan is approved. Lenders can check credit history up until the closing day, and a large purchase could lower the score and possibly cost them a mortgage approval.
2. Get Pre-Approved for a Mortgage
Sellers will want to know that a buyer interested in their home has already been approved by a lender. Buyers can contact their loanDepot loan officer and apply to be pre-approved before starting to house hunt. To
get approved, they must verify employment, income, and assets. Self-employed buyers will also need to get their paperwork in order, such as bank account statements, W-2 forms and tax returns. loanDepot will respond quickly with a pre-approval letter
that will let them know the maximum amount that they can borrow. Talk to the loan officer to get the appropriate paperwork needed for special situations like self-employment, seasonal employment, pending law suits or liens, and co-signers.
3. Avoid a Low Appraisal
Appraisals that are lower than contract prices are a leading cause of delays and lost contracts. They are especially prevalent in markets where prices are rising quickly, or in multi-bid situations where buyers end
up offering more than the home is worth. Lenders will not lend more than the appraised value of the property, so if the appraisal is low, a buyer will have to make up the difference in cash, renegotiate with the seller or lose the house altogether.
Avoid low appraisals by getting a good valuation of the property from the real estate agent and refuse to offer more. Instead of raising the purchase price, the offer can be sweetened by increasing the down payment. Buyers should have enough cash
on hand to cover 5 to 10 percent of the cost of the house to protect themselves from a low appraisal. Having a cash cushion will also help to ease sellers' fears should a low appraisal require a larger down payment.
4. Complete Negotiations Quickly
Book a home inspection as soon as a signed contract is in hand. A home inspection can be done within ten days after the contract is signed - including radon, mold and pest inspections. Share the results and negotiate
any issues regarding the condition of the property immediately. Agree on how to address issues, such as reducing the price or having the seller handle necessary repairs before closing. Don't procrastinate on these negotiations, since they could affect
the final purchase price and the amount of financing that will be needed.
5. Be Ready to Review and Approve the Closing Disclosure
Three business days before closing on a loan, the lender provides a detailed accounting of the transaction, including all costs associated with making the loan and closing services. Be ready to review it immediately.
Check the figures against all of the transaction records. Ask for any clarifications and approve the disclosure as soon as possible to avoid a delay in the settlement.
By being prepared, making time to act quickly, and paying attention to each step in the process, a buyer making a home purchase or refinancing a home can help make the mortgage approval process much faster.
For information on how to contact a professional loan officer, visit: AllGreaterBostonRealEstate.com, call: 617-433-9225 or email: Team@MikeHughesTeam.com