Thursday, September 26, 2013

Can you really complete a "Quick Close"?

Nationwide, as demand and competition for homes for sale has grown, so has buyer demand for "quick closings".
Note that the term "quick close" is without strict definition. You know a closing is quick when you're in one. There is less time to get a mortgage approved; less time to scout the home inspection; and less time to prepare for your final settlement.
Requests for quick closings have climbed as the home buying landscape has become more competitive. Buyers will offer to "close quickly" so their purchase contract stand-outs among the competition.
Offering to close within 30 days is one way in which buyers attempt to "sweeten the deal". And now, today, as lenders approve purchase home loans more quickly, buyers can offer quick closings with more confidence.
Ellie Mae reports that the average time to process, approve and fund a purchase loan fell by four days in August to 42 days. This equals the fewest number of days since Ellie Mae started tracking such data.
The main reasons why purchase turn-times are improving is that mortgage rates have increased.
During May and June, mortgage rates rose nearly every week, moving from 3.35%, on average, to somewhere north of four. This increase -- and its sudden, sharp nature -- spawned a surge of refinance and purchase applications as buyers rushed to get ahead of the market.
Lenders slowed down as pipelines filled up.
Then, with mortgage rates elevated through July and August, refinance activity slowed. Fewer homeowners pursued the FHA Streamline Refinance and VA Streamline Refinance programs; and fewer homeowners attempted to use HARP.
As loan volume decreased, lenders were able to turn purchase approvals more quickly to the benefit of today's home buyers.
Through the end of 2013, however, mortgage rates may move lower. As loan volume rises, then, your ability to do a quick close will wane. Therefore, if you're going under contract and want to maximize your closing speed, follow these helpful behaviors. Your loan can be approved more quickly.

How To Get Your Purchase Approved More Quickly

For buyers wanting to close quickly, some of the loan factors will be beyond your control. For example, you cannot control how fast an appraisal is performed because the appraisal requires the cooperation of the seller; or how fast a title search is performed by a title company.
However, there are steps you can take to make sure your loan gets approved as fast as humanly possible. Step one is to be prepared.

1. Know Your Paperwork Requirements

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. This can include 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 drivers 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. You know you're going to need the documents. Consider scanning them and having them ready in advance. This can save days off your approval time and help you reach your closing more quickly.

2. Don't Keep Secrets From Your Lender

Be honest and open with your lender -- even if you worry that what you share may harm your approval. There are two reasons for this.
The first reason to share is that withholding information from your mortgage application can constitute loan fraud, which is a far worse outcome than not getting mortgage approved. The second reason is that your mortgage lender will often uncover what you're electing not to share anyway.
As part of the mortgage approval process, a credit check is performed and various "occupancy tests" are conducted by an underwriter. Employers are contacted to verify job status and public records are sometimes checked as part of the approval.
With so many mortgage programs available for today's home buyers -- from large-downpayment to low-downpayment to no downpayment at all -- the more information you share with your lender, the more equipped he'll be to help you close quickly.

3. Use Pre-Approvals To Speed Closing Time

For a buyer, mortgage pre-approvals are among the most under-used tools to speed a purchase closing. Home buyers with pre-approvals in-hand at the time of offer can typically reduce closing times by one week or more. It's 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 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, the only missing item is often the physical property address of the home being purchase. To compensate, lenders use dummy information based on probable loan data including a sample purchase price, a sample real estate tax bill, and a sample homeowners insurance policy and/or homeowners association assessment, where applicable.
With their loan "pre-approved", buyers can move immediately from the "Writing The Contract Phase" to the "Underwriting The Loan Phase". This can save 7 days or more days from the approval process.

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