Why does getting a mortgage take so long?

Getting a mortgage loan means you’ll likely experience every possible emotion. Unfortunately, a word commonly used to describe the home loan process is “stressful”.

When buying or refinancing a home, anxiety can come from a number of reasons. More often than not, it’s not knowing what to expect.

A common example of one of the unknowns is the amount of time it takes to get a mortgage. Add to it the notion of relocating your family and all your earthly possessions, regardless of the time it takes, the process can seem like an eternity.

Average amount of time to close a home loan

The average time to close a mortgage loan continues to hover around its lowest level in two years. According to the Ellie Mae’s August 2020 Origination Report, the average time to get from application to closing dropped is 49 days.

Largely due to the real estate market as well as the lending institution, this can easily extend to a month and a half, even two months.

For example, in a normal market, many lenders are averaging just 30 days. Larger banks and credit unions, on the other hand, will often take longer than your average mortgage lender.

To an anxious home buyer, even a short 30-day turnaround can seem like an eternity.

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Why does it take so long to close my loan?

Generally, there isn’t just one answer to why your mortgage application is taking longer than your neighbor’s. Everyone’s situation is different.

There are a number of common explanations that can cause a longer time to process your application.

  1. New government imposed mortgage rules. In 2014, new regulations were set in place by the Consumer Financial Protection Bureau (CFPB). These new rules significantly affected the way mortgage lenders originate home loans. It takes lenders longer to document and verify a homeowner’s ability to repay the loan.

  2. Appraisal standards. Pre-housing crisis, mortgage lenders had much more flexibility when it came to getting an appraisal completed. But appraisal standards changed significantly on a number of levels. Nowadays, appraisal management companies are required to follow stringent guidelines. This further delays an already time-consuming process.

  3. Title-related delays. Many homeowners don’t know everything that goes into obtaining a mortgage. Procedures such as making sure there’s a “clear title” to the property are important aspects of getting your loan closed. If there’s any judgments or liens on the property, these need to be cleared up before you can close. Unfortunately, this isn’t always a quick fix.

  4. Stringent underwriting. Although underwriters have shown significant signs of loosening up in recent years, homeowners still go through a number of screening processes. The underwriting process can be intense. Underwriters will often request additional documentation based on the initial documentation presented. Even the most seasoned loan originators can’t always anticipate the items a stringent underwriter will require.

Ways to speed up your loan closing

Fortunately, there are ways to be proactive with your home loan process.

Some things have changed in the application process for sure. However, you can almost always count on some “old faithful’s” when it comes to the documentation your lender will request.

It helps to have the following items readily available to your lender:

  • Copies of driver’s licenses and social security cards

  • Most recent two months of paycheck stubs

  • Most recent two year’s W2s

  • Most recent two year’s tax returns (all pages)

  • Most recent retirement account statements

  • Most recent two month’s bank statements (all pages)

  • Documentation to source any cash deposits into your bank accounts

  • Contact information for your homeowners’ insurance

Your lender may request additional items, but having these items handy will save you lots of time.

Other things you can do make your loan process go faster

One of the first steps to getting qualified for a loan is having your credit checked. You can get ahead of this one by requesting a copy of your credit report and clearing up any discrepancies that could hurt your chances of getting approved.

Lenders will need to verify a full two years of employment history. If you’ve had several jobs in the last couple of years, this isn’t an automatic deal-breaker, but it can cause delays if you don’t have all of the details ready for your lender.

You can get ahead of the curve by having all of the contact info and dates available so your lender can conduct all of the necessary employment verifications.

There will always be some areas that are out of your control when it comes to getting a mortgage loan. Just knowing this fact can bring some peace of mind. But being proactive and staying ahead of the process can help ensure a faster and smoother closing.

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