(…and how to avoid it taking over your life for half a year)
Whether you’ve picked out your dream house and need a purchase loan or you continue to see mortgage rates advertised for much lower than what you have and decide it’s time to refinance, applying for a loan is your next step. You most likely get input from friends, family, real estate professionals, and advertisements as far as who to apply for your mortgage with. You do research online, talk to some mortgage professionals (make sure they’re licensed – type their name or NMLS# into http://nmlsconsumeraccess.org/ to verify credentials and licenses), and make the final decision of picking a few mortgage lenders or brokers. You call the mortgage companies of choice and tell them you want to apply.
Most borrowers think obtaining a mortgage is a standardized act and that the process utilized by mortgage lenders and brokers are as interchangeable as going to the mall to buy a pair of pants. Just find the best value between all the stores and go to the register to pay – it’s a 2 minute job, right? Wrong. If you’ve applied for more than one mortgage in your lifetime you already know this isn’t the case. If you’re reading this and are going for your first mortgage, you’ll have to take my word for it.
Your initial focus in applying for your mortgage is to find out, in accurate terms, what you qualify for. This time frame taken by each mortgage professional you speak with to complete this process is the first step which differentiates one company from the others. The mortgage technology which is commonly available makes it possible for a mortgage professional to determine accurate terms for you in 30 minutes or less (provided you as the borrower have provided information required for a complete credit application). For many of the new refinancing programs such as the FHA Streamline, you can cut this time down to 5 minutes.
I talk to potential borrowers all the time who tell me that they are waiting for quotes from other lenders or brokers – it’s the normal thing for people to do. What strikes me as ridiculous is that potential borrowers will wait days and even weeks to receive a phone call back for that quote. As I mentioned above, an accurate quote or advancement of the qualifying conversation to get to an accurate quote can be delivered in 30 minutes or less, no exceptions. This should be roughly the same time it takes to order and have dinner served in a chain restaurant on a Tuesday night. Would you really sit at TGI Fridays for 11 days for your mozzarella sticks to come?
The funny thing is that almost everyone I speak with is ok with this. They think the mortgage originator has a team working round the clock on their magic quote which will be far and away the best financial solution for them. The reality is that the person who took your application and isn’t getting back to you doesn’t make lending decisions. Instead they’ve pawned your application off to the person who does, and that person has a stack of 273 applications in line before yours. If you’re someone who enjoys renewing their driver’s license at the DMV or going to Disney World on school vacation week, this system is perfect for you.
If you’re not ok with this you should be prepared to cut ties with any mortgage professional who cannot provide a quote, or worse yet, return your phone call in 24 hours or less. They’re either too busy to give your application the proper attention it deserves or they are a middleman to the lending decision maker. Rates and programs are roughly the same everywhere based on what you qualify for – the extra time isn’t getting you a better deal. For every day it takes for you to get your initial quote back, add 2 weeks to the overall process.
Who cares how long it takes, you say? If you’re buying a house, the sellers care as well as the Realtors involved in marketing the house and negotiating the sales price. If you’re refinancing your mortgage, you should care. Every day that goes by is an additional day of interest you are paying on a mortgage you are trying to get rid of in exchange for better terms.
Here’s a simple formula for determining if you should expect an efficient mortgage process – the less people involved in it, the faster it will go. Here’s what it looks like In a perfect world:
- You apply for your mortgage directly with a licensed mortgage originator who can provide an accurate quote as well as collect all your documents and sign disclosures.
- Your complete file is turned over to an in-house (same location as the originator) mortgage processor who completes all the verifications, orders mortgage payoffs and title searches, and prepares your application for underwriting (which is also done in-house).
- The underwriter approves your loan and works in tandem with the processor and mortgage originator to finalize the loan approval.
- The finalized loan is turned over to the closing department which draws up the final figures and closing forms and schedules your closing with the title attorney.
- The closed loan is given to the funding department which disburses the proceeds of the loan you obtained.
That’s it – 5 people who have direct communication to the person before and after them in the process. If you have more than one person handling Step 1 or find out the person you applied with doesn’t have access to communicating with the person in Step 2, you’re in for the long haul and all the phone calls you make and voice mails you leave won’t help your cause.
Charles D’Arezzo, Sr. Loan Officer (NMLS# 29022)