For me, a good recipe has three main components – less than five ingredients, less than 30 minutes and less than two pots. A good real estate transaction is not so different than a good recipe; the objective is to keep it simple.
One of the most tortuous aspects of buying a home has always been the mortgage application process. First, you are asked to provide the lender with W2s, pay stubs, tax returns and possibly your blood type. Then the “loan officer” does a credit check and pulls your credit score. He/she then rolls up their sleeves and adjusts their eye visor and starts plowing through your personal data trying to find why you may not be trustworthy with their money.
The first thing they’re looking for is credit score and if your score is hovering around 600 be prepared to renew your rental lease or pay a larger down payment and/or higher interest rate. Also, your income must support the amount of mortgage you’re applying for and your general credit report must show no serious late payments and hopefully no bankruptcies.
Naturally, while this process is under scrutiny, you will experience some of the most stress you will ever have especially if you’re a first-time buyer. But there is good news which may not take away all of the steps during the process but could speed up the process considerably.
Mortgage lenders are starting to outspeed themselves, that is promising quick mortgage confirmations and a more streamlined process, even offering cash bonuses if they don’t meet their target date. In 2018 it took an average of 43 days to close a home mortgage but now some lenders are doing it in 21 days or less.
One of the ways this is accomplished is of course through technology that can link banks to the loan application allowing the lender to obtain documentation and data directly. It may also be possible to have a remote closing, also speeding up the process.
In addition, with the blessing of Freddie Mac and Fannie Mae, some properties may be eligible for an “appraisal waiver,” the thought of which makes me shake in my sandals. Instead of Fannie and Freddie having more restrictions in the wake of the 2008 financial crises fueled by low down payments and many no documentation loans, the Housing Finance Reform recently issued has done the opposite, keeping the American taxpayer on the hook for loan defaults.
However, mortgage rates are approaching 4 percent which will hopefully jump-start the housing market. The average 30-year fixed rate mortgage during the first week of April fell to 4.06 percent, the lowest since January of 2018. Freddie Mac said the rates have been dropping quickly as much as a quarter point in one week, the biggest drop in over a decade. Naturally, mortgage applications increased by 8.9 percent in early April.
I’m not sure how I feel about the link to your bank but other than that I’m all for a speedy process, which can be very important if you have an all-cash buyer who has suddenly shown interest in the home you want. So future homebuyers, as you start stepping back into the market since you can’t resist the interest rates, just remember less is more, in mortgage processing and in cooking.
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