When it comes to finalizing home loans, lenders are moving faster.
Many home buyers are surprised to learn that closing on a mortgage can be a lengthy process. The reason? There are numerous steps involved in finalizing a home loan, and each step is important.
First, a lender needs to review the information it receives from an applicant. That generally includes tax returns, bank statements, pay stubs, and other documents that paint a comprehensive picture of an applicant’s finances. All of that information is then verified by an underwriter.
After that, the home being purchased needs to go through an appraisal to make sure it’s worth enough money to justify the amount being borrowed to finance it. Finally, a title search needs to be performed to ensure there are no legal issues with the sale itself.
All told, it’s not unusual for a mortgage to take 60 days to close. But these days, mortgage lenders are managing to do a bit better.
Mortgage closings are speeding up
In April, the average time to close on a mortgage decreased for the fourth month in a row to 51 days, according to ICE Mortgage Technology. And that’s actually a good thing for buyers for a couple of reasons.
First, when buyers get approved for a mortgage, they’re generally able to lock in the interest rate they’re presented with for a limited time. That period could be 30, 45, or 60 days — or longer. But generally, extending an initial rate lock costs money, and if a mortgage closing is delayed, that’s an expense a borrower could wind up having to bear. But now that lenders are getting faster at closing mortgages, having to pay for rate lock extensions becomes less of an issue.
Second, faster closings allow borrowers to move into their homes more quickly. And that could work to their advantage, especially for those hoping to complete a move by a certain deadline. For example, an applicant might apply for a mortgage in late June in the hopes of moving into a new home by late August, before the school year starts, but a delayed closing could prevent that from happening.
How to help your mortgage close faster
If you’re in the process of getting a mortgage, you may be eager to finalize that loan and take ownership of your new home. While some delays on your lender’s part may be out of your hands, one thing you can do to move things along is be available to your lender and respond quickly if your lender asks for more financial information or documentation. The sooner you provide your lender with the details it needs, the sooner your loan can get processed.
For the most part, though, the speed at which your mortgage closes really depends on how fast your lender works and how overloaded that company is. During periods of high mortgage demand, lenders can get backlogged and closings can take longer. Given the state of today’s housing market, an average mortgage closing time of 51 days really isn’t bad at all.
A historic opportunity to potentially save thousands on your mortgage
Chances are, interest rates won’t stay put at multi-decade lows for much longer. That’s why taking action today is crucial, whether you’re wanting to refinance and cut your mortgage payment or you’re ready to pull the trigger on a new home purchase.
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