Getting a mortgage loan to buy a house is a multi-step process. First, you apply and may receive your pre-approval letter. This means that the lender has reviewed your finances and would most likely be willing to lend you a certain amount. Then you make your offer, the seller agrees, and you enter the underwriting phase.
Underwriting is when your lender fully evaluates both your finances and the home before approving the sale. Underwriting typically takes between 30-45 days to assay the property and do a final assessment of your finances. Buyers cannot purchase the home until underwriting is complete and, unfortunately, there are several things that can cause a delay in the process.
If you want your underwriting to go as quickly as possible so you can move into your new home, we can tell you how to avoid those unwanted delays.
1. Submit a 100% Complete Application with Documents
The number one avoidable cause for underwriting delays is incomplete paperwork. If your loan application is not completely filled out and accurate, then your loan officer will need to call you to get these matters cleared up before they can complete (or sometimes even begin) the underwriting process. This also includes any specific documents your underwriter needs to confirm the financial details of your purchase.
Ask your loan officer to help you prepare your application and documents before underwriting begins so you can submit a 100% ready application.
2. Never Fudge the Numbers with a Lender
Don't fudge the numbers. The second biggest avoidable cause for delays is when a loan officer has to find the truth when clients have rounded or exaggerated their wealth. It is unfortunately quite common for eager homebuyers to represent their finances as slightly (or much) larger than they are in the effort to become homeowners. However, only accurate numbers that can be proven, researched, and confirmed will be considered. The time it takes to correct inaccurate statements will cause delays and can possibly result in your loan application being rejected even after pre-approval is issued.
3. Promptly Respond to Emails from Your Lender
If your lender needs additional information, you want them to have it fast. Every question or missing document is a delay that you don't need. So stay by your email and set up alerts specifically when your loan officer emails. Answer promptly and send all the information they need same-day to minimize even one day of delays to your underwriting. The longer you wait, the longer the process will take.
4. Put a Freeze on Big Purchases
One surprisingly common mistake is to make a big change to your finances with a big purchase or co-signing someone else's loan during the warm-up to buying a house. Don't.
You want your finances to stay exactly where they are from the moment you fill out the pre-approval application to the moment your home is purchased. Any recent changes to your finances will hinder the underwriting process and may even make you ineligible for the loan.
5. Make Sure Fixer-Uppers Meet the Minimum Requirements
Most mortgage policies include minimum requirements for a property - like heating, roofing, and working electrical systems. If you're planning to buy a fixer-upper, it's important to know these minimum requirements or your loan may be rejected when the lender assesses the property. You will need to either choose properties that meet the minimum, negotiate with sellers to reach the minimum with minor updates, or seek a non-mortgage type of loan which excludes these requirements.
6. Check the Requirements for Small and Unusual Properties
Unusual properties and tiny homes may also fall outside mortgage standard requirements. Some tiny homes cost too little (yes, that's real) or have too small a floorplan to be considered. Unusual properties may simply delay lenders because they are not sure how to determine the standard value or how much it is safe to lend based on the property's features.
7. Don't Change Jobs If You Can Help It
Finally, don't change jobs. We know that not everyone can control losing or gaining a job, but a change in employment will be seen as a less stable financial position. Also, like making changes to your finances, lenders will need to perform a re-evaluation even if you very quickly have a new job that provides a similar income to the previous.
If you do need to change jobs or have a career change coming, talk to your lender. If you are making a smooth income transition, knowing this information will allow them to help you strategize your mortgage approval.
Ready to Become an Informed Home Buyer?
Buying a house is a large and complex process, and those who understand it are likely to get the most benefit. To learn more about the home buying and mortgage process, reach out to First Savings Mortgage to speak to a knowledgeable loan officer about your plans today. We would be glad to answer your questions and offer any advice that could make your home-buying process smoother and more enjoyable.