In recent years, mortgage underwriting requirements have become stricter, and the days of closing real estate deals with high leverage, low to no down payment, minimal documentation, and easy approvals are over. Faced by new regulatory requirements and an overall aversion to risk, many financial institutions have pulled in the lending reins by tightening credit standards, often requiring in-depth proof of income and assets, better credit scores, and higher down payment amounts (up front equity invested in the property) than before the financial crisis.
While your conditional approval may be done in a flash, today’s loan underwriting process can take 40 days or more, depending on the circumstances. You may be asked to provide additional documentation or resubmit paperwork. Keep in touch with your loan officer, who should be able to answer any questions you have about the process. On the closing date, when the loan agreement is signed, be sure to double-check the paperwork, fee schedule, interest rate, principal and other terms to be sure there are no errors.If your loan or refinance is denied, don’t be discouraged. Often, your loan officer can tell you specifically why and help you develop a plan to address the issues. Perhaps you need to pay down additional debt or save more of a down payment. Create a plan to address the issues and, when you’ve done so, apply again.
1 July 2014 Senior Loan Officer Opinion Survey on Bank Lending Practices, Board of Governors of the Federal Reserve System, Released August 4, 2014. Question 13. http://www.federalreserve.gov/boarddocs/snloansurvey/201408/fullreport.pdf
2 February 2013 Ellie Mae Origination Insight Report, Ellie Mae. http://www.elliemae.com/origination-insight-reports/Ellie_Mae_OIR_SEPTEMBER2014.pdf
3 Federal Trade Commission News Release, February 11, 2013. http://www.ftc.gov/opa/2013/02/creditreport.shtm
The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons.
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