Here’s an article that I originally wrote when the real estate market was a little more competitive back in March of 2010.
Our closing times are averaging about 27 days right now, sometimes even faster. Closing your loan early or on time is a huge competitive advantage when trying to appeal to sellers.
Can closing in under 30 days on your purchase give you a competitive advantage over other offers?
You Betcha! Sellers want to sell as soon as possible. You want a competitive advantage. This is the best of both worlds.
Typical escrow period listed on a purchase offer is 30 days from accepted contract. Most lenders will need 30 days or more in many cases to complete the loan approval and underwriting process. Many big banks will take 45 days or more to close escrow!
There are several reasons why a lender would not be able to close your loan in 30 days or less:
A Quality Pre-Approval is the Most Important Step
The Pre-Approval Process should be the most time consuming and paper work intensive part of the home financing process.
Your lender should ask that you complete the loan application, submit all of your income documentation including pay stubs, W2′s or tax returns and possibly even a 4506T form (permission to request tax transcripts from IRS).
Your lender should also ask for documentation to show all of your assets required to cover the down payment and closing costs required to close the loan.
If you are moving money from one account or another in order to have all of the funds in one place, this will require that you produce a paper trail documenting how much you had in each account before you moved it, paperwork showing the money being withdrawn from one account and deposited in another.
If you are getting gift funds, an inexperienced or unprepared lender could lose several days if this is not documented correctly. You need to provide documentation from the gift giver showing the money was available to give, accompanied with a gift letter stating the relationship to you and stating that there are no expectations that the money be paid back, because it is a gift.
Also, if instructions for receiving the gift funds are not clearly explained to you – your lender should explain this procedure – there could be serious delays and inconvenient burdens placed on the person giving you the gift.
Once all of your documentation has been received by the lender, the quality of the pre-approval is what will determine whether or not you are prepared to move quickly once your offer is accepted.
After you get your offer accepted….that’s when you separate man from mouse. The timelines are vital if you want to close quickly.
Although there are specific and strict timelines on when disclosures need to be sent out and when the appraisal can be ordered, you should be able to submit the contract, open escrow and receive an underwriting approval within 72 hours give or take a few hours.
You MUST ask your lender about their stated turn times. If your lender does not meet a turn time, and does not inform you until after it’s past, you are on dangerous ground and this may be the start of a pattern of broken promises and miscommunication.
A turn time is the time it takes to complete certain steps in the process. Common “turn time” steps are:
Initial underwriting approval
Time to review conditions
Time until loan documents are ready to sign after being ordered
Time to fund after loan documents have been received
The reason I am writing this post today is because here at Broadview Mortgage – Katella Branch, we specialize in saving broken loans that other lenders screw up on, usually closing these “Loan Emergencies” in 30 days or less…our fastest was 10 days and that was due to disclosure laws recently passed that would not allow us to produce the loan documents faster.
Manager at Broadview Mortgage Katella in Orange, California, I am passionate about educating and empowering consumers. Feel free to call, text or email me at (714) 805-7268 or ScottS@broadviewmortgage.com
You need to really careful with this one. We offered the 21 day escrow, for an REO Deutsche Bank is selling for Wachovia. Their 30 day addendum that they make you sign is one that has a penalty in it that if the Lender you are using does not make the sellers' deadline, you will end up paying the $250 per day penalty until escrow closes. Our lender told us that they could do it, but that did not happen. As a result, we did not lose the loan, but we ended up paying $1,650 in penalty charges as a result. We just closed escrow on 1-25-2010 for our second home in Oakland, CA (Seller accepted offer 12-7-2009)..
You're absolutely right John. There are many things than can cause delays in the process. Communication is very, very important. If it is a delay caused by the seller it is very common to have that penalty extended. If the lender promised and didn't meet the deadline, I would expect that they would have covered that penalty.
Thank you for your input - very valuable....and I'm really happy to hear that you were able to close on your home!
California Licensed by the Department of Corporation under The California Residential Mortgage Lending Act License Number #813G067; Equal Housing Lender. Katella Branch NMLS License # 170528. Licensed by the Department of Corporations under The California Residential Mortgage Lending Act, License Number 413 0745.