How Can I Speed Up My Approval Process?
When starting an application for a mortgage loan, it’s important to consider that the process can take upwards of a couple of months, many times due to matters outside of the borrower’s hands. While there will always be a minimal amount of time a borrower must wait for the application and underwriting process to turn into a mortgage approval, the borrower can prepare for the approval process accordingly to ensure that the process can go as quickly as possible; sometimes as little as a couple weeks if everything goes smoothly.
First Step: Get your Own Finances and (Proof of Current Finances) in Order
Before starting your mortgage application process, you must have all of your finances in good standing. If you have any debts that have been turned into collections in your name, you must pay off the debts before the application process can even proceed, as they’re required to be paid before closing on your mortgage can occur. Some lenders may require a letter from your debtors and collection agencies noting that the debts have been paid if you retain these outstanding debts at the start of your application process. It may be best to pay off these outstanding debts (if in collections) at least a month before the mortgage application process, to ensure your payments and clearing of debt are reflected during your credit score check.
You will need to confirm that your current credit score is satisfactory ahead of the application process to ensure that it won’t hold up your approval. This can easily be done through one of the many free resources online, which many of the same providers provide fully automated phone services, as well. Ideally, your credit score should be at least around 700 to ensure lenders that you’ll be a reliable borrower.
You must maintain your financial obligations as well- credit debts, credit fees, and bills must be paid timely both preceding and during the application process, and checking and ensuring that your credit score is, and remains above average before and during your mortgage application.
Get your financial documents in order before your application. For loan approval, you’ll likely need to provide your most recent pay stubs, W-2s from your last two years, and bank account statements. If you have any additional savings, investment, or retirement accounts, you’ll need statements from each of those, as well. While collecting documents, make sure you have your personal documents as well- your social security card, and form of valid identification must be presented with these financial documents.
Second Step: Ensure Your Savings for Fees and Down Payments
You must prepare for the substantial fees that come with mortgage approval- an Earnest Money Deposit is a deposit of money towards the seller of the property, seen as a customary action of good faith to ensure your intentions in purchasing. This is usually around $500-$1000 for a home under $500,000, though higher-priced homes can require a payment up front of upwards of $5,000 to $10,000.
There are also Closing Costs/Fees associated with the cost of closing a mortgage, which typically ranges between 2% and 5% of the total cost of the home. Prepare your finances against your prospective home’s cost, and plan accordingly.
Finally, Down Payments must be considered. A large down payment towards your lender will greatly improve the likelihood, speed, and ease of your mortgage approval; these funds also will go directly towards your mortgage, so consider a down payment as funds you pay now to ensure you won’t have to pay them later. Down payments aren’t a requirement (especially for more affordable housing), but if you’re looking to speed up your mortgage approval, a payment of upwards of 20% will greatly improve your mortgage experience.
Third Step: Apply for a Preapproval Letter
A preapproval letter is necessary for speeding up the mortgage approval process, as many real estate agents won’t show houses and properties to buyers without one; most real estate agents need to confirm that you can purchase a home before beginning what can be a long laborious process of finding a home that’s the right fit for you. In the long run, the preapproval process saves you time, and also helps buyers hone in on what their scopes and budgets are in the homebuying process.
Fourth Step: Finalize your Seller Negotiations As soon as possible
Many negotiations take place between the buyer and seller, which can cover a large variety of factors before both parties get to the closing table. It’s common for aspects of negotiations to change throughout the homebuying process, as new information is being considered throughout the negotiation period.
Many of these points of negotiation come about due to information uncovered during the standard home inspections. Thankfully, this often works in the buyer’s favor, as the uncovering of repairs and certifications needed can bring the cost of the home down. While negotiations can happen until terms are signed in the closing process, it would be in your best interest to come to an agreement or compromise on terms with the seller as soon as possible if you need to speed up the approval process.
Fifth Step: Schedule Inspections and Appraisals to Occur As Soon as Possible
Inspections and appraisals are required in order for lenders to support a buyer’s home purchase. These tests need to occur in order to negotiate with your lenders and with your sellers. Make sure that all inspections required can be scheduled far in advance of the closing.
Sixth Step: Do Not make any Substantial Life Changes
It would be in your best interests to avoid any notable changes in your life and finances during the mortgage process. Life happens, but try to make any big changes before or after your mortgage process. This entails life events like quitting or changing jobs, moving, purchasing anything large that will require a loan or credit check (cars, boats, etc.), or adopt any children. Also, financial events your banks or creditors would notice, like applying for credit cards, bouncing checks, changing banks, transferring large sums of money between bank accounts, or making any substantial deposits into your bank accounts.
Final Step: Keep Open Lines of Communication
The homebuying and mortgage processes are long and winding roads, on which many stops and detours must be made. There are so many constantly changing elements that need your time, attention, energy, and money. Even moreso, there are elements that are unfortunately, just out of your control. The best way to mitigate this is to keep open lines of communication. If you’re utilizing a broker to help mitigate costs and keep the speed of your approval process up, be in constant contact with them. This goes for any lender, seller, inspector, or other professional involved in the long, laborious process. Know at all times the status of the moving parts in the mortgage process, by communicating whenever you don’t know.
If keeping the speed of your mortgage approval is paramount to your home buying process, line up your finances, know you’re negotiating points going into the negotiation process, and be open to compromise. Open the lines of communication wherever you can; if you find yourself overwhelmed navigating all of this process, an independent broker is used to these processes- if you need assistance with managing yourself and others throughout the process, the mortgage broker can be your best friend and main contact throughout the entire home buying process.