You hand in all your paperwork, fill out all the documents, answer all questions as soon as they are asked of you and you are still waiting for a closing date. Why does it take so much time to get the words “Cleared to Close”.
There are many factors to consider:
- The lender or broker has 3 days after you fill out an application to get to you’re the disclosures for you to sign. Be prepared as these are the first of many documents that you will need to sign. These disclosures will be the worksheet of charges, the Good Faith Estimate, the Truth in Lending form, the Patriot Act for and other disclosures as stated need by the lender. These need to be signed and returned right away. You will only get the disclosures if you have provided the Loan Originator 5 critical pieces of information, Your Name, Your Social Security Number, Birth Date, Address of property for loan and value.
- During this time your home inspection of 10 days is starting if you are purchasing a house. In the disclosures is the authorization for an appraisal (Every lender will get an appraisal done for the property as it validates the risk on the property value.) That process usually 5 to 7 business days from start to finish. Title is also working on getting all the information on the property to ensure that there is a clear title.
- After you sign the disclosures and return them, they are submitted into underwriting where they will get a pre-approval for loan. This is a Go or No Go from the lender to keep the process moving. If you get a No Go, they might be asking for additional documentation or other borrower. If you get a GO, it means that up to now, there are no red flags to stop the process.
- The appraisal gets ordered. You, the borrower, usually has to pay for this upfront. It is a cost to you.
- The underwriter requests Conditions to get the loan closed and this need to be submitted to underwriting.
- The underwriter works on loan profile using the 3 C’s, Credit, Capacity and Collateral to ensure the risk factor of the loan.
- After all the resubmits have been completed and all the information has compiled, the underwriter will give the cleared to close notice on the loan file. This means that documents can be drawn up and sent to Title, where they create the HUD-1 (worksheet listing out all the payouts on the loan). This takes several days.
- Title Company will make arrangements for borrower to come into office and sign documents. They will also make arrangements for the seller as well to sign documents.
- If it is a refi then there is a 3 day right of rescission before the loan will fund, in case the borrower changes his/her mind. If this is for a purchase, then it will usually fund the next day.
In all of this, we did not discuss the back and forth of how quickly documents get into the right hands, how fast answers are responded to, how much time was given to the escrow date. Usually it can be done in 30 days, but Refi’s have been taking close to 45 days. Be patient and work with your Realtors and Lenders for the due date. Plan for wiggle room if needed, you never know what will happen.
When you want someone to hold your hand thru the mortgage processm call US! We are here to help!