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It’s one of the most stressful things mortgage originators, realtors and buyers ever face – last minute emergencies with closings.  Without careful and considerate management, it is easy for a client to find themselves in a strung-out paperwork battle and a fight against time.  But fortunately, the mortgage lending process doesn’t have to be this way for you.

Let’s take a look at the different steps in the lending process and how you can avoid being left with little to no time left on the clock!

The Lending Process explained

In theory, the lending process shouldn’t be a difficult process to tackle; it essentially breaks down into six basic steps:

1. Application
2. Pre-approval
3. Contract
4. Conditional Approval
5. Final Approval
6. Closing

Theoretically, once the mortgage application  is complete, it can be pre-approved with validating documentation and a contract can be drawn up so that the client can progress. This should take a reasonable length of time and come with as few complications as possible.

However, not every lender makes life as simple as NOLA Lending!  But even NOLA Lending sometimes gets stuck with last minute issues during verification (usually things the buyer didn’t disclose) or if someone such as a 3rd party drops the ball.

Common problems in the lending process

Unfortunately, some lending agents from other companies often choose to incorporate drawbacks into the lending process. NOLA Lending always advocates against these tactics and aims to secure your loan as quickly and accurately as possible.

Other lenders can delay your closing by a few extra weeks for any number of reasons such as:

• Lack of experience
• Poor management
• Incompetence
• Lack of communication

How a 30 day contract can be misused

Let’s take a look at how you could lose time and money by negotiating with an irresponsible lender.

First, understand that if you write a 30 day contract to close but you have the lender wait 10 business days for inspection and responses the close date is already in jeopardy.  A lender cannot get officially started without ordering an appraisal, so if you put that on hold for inspections the lender may not have enough time to close.

Below are steps to understanding a 30 day contract, title, and submitting the file for approval from a lender’s prospective:

1. Receive ALL client docs including the contract.  Delaying sending the lender a document can “pause” the whole process.
2. Order title
3. Order appraisal
4. Order insurance
5. Request additional documentation from clients and/or agents
6. Lender waits…
7. Documents are returned (hopefully quickly)
8. The loan is presented to the underwriter
9. Lender waits…
10. Underwriter issues conditional approval
11. Lender works approval and requests all required items from 3^rd parties
1. Updated income or assets should be obtained
2. Missing signatures on real estate forms should be completed including amendments, etc.
3. Explanation letters may be required
4. Updates or corrections to appraisal or title, or any other issues should be addressed
12. Lender waits… until everything is received from ALL! We cannot submit for final approval without these final docs!
13. Once ALL documents are received from ALL parties, submit for final approval and Clear to Close.
14. Receive final approval and Clear to Close
15. Send closing package
16. Close!

After a successful closing!

This may seem like a simple process, but let’s take a look at what is really going on here.

• The contract is written – so far so good
• The clock starts 30 days counting down – Those 30 calendar days are really only about 22 business days
• Lender waits on inspections (only if Agent or Client requests the lender to do so).  This may mean up to 10 – 12 days of additional delays
• Now there are only 18-20 days left and counting down quickly
• All paperwork must ordered from different parties which can take time while we wait on what we asked for
• The time in between dwindles down to about 5 business days or less of close very quickly

As you can see, not everything is quite as simple as it seems. Unfortunately, these delays are all too common.

How a 30 day contract can be further delayed

Other legitimate examples of how the lending process can be delayed can include:

• Insurance company waits until the last minute to submit insurance as it is needed long before the close date (express a sense of urgency with your insurance agent)
• Clients employer takes a while to provide information (same as above)
• Client takes a while to produce docs (work urgently and diligently to provide info & docs)
• Agents may take a while to produce required certificates or inspections

So if a poor lender wastes valuable time and everything doesn’t come back to the lender within 48 hours from the closing, and it takes 24-48 hours (generally) for an underwriter to review submissions; last minute issues can appear quickly, and worst of all, appear to be all the lenders fault although it really is not.

Study documents at the closing!

How to get the most from the lending experience

NOLA Lending wants you to know there are many responsible lenders out there and we hope you chose one of us to work with, and that there are simple ways you can help combat unnecessary delays in the lending process.

Here are some quick tips NOLA Lending advocates to help you save valuable time and money:

• Research the company you are going to work with
• Talk to an loan agent and see if you agree with their attitude and competency
• Make sure you uphold your part of the contract and submit paperwork immediately
• Feel comfortable being able to discuss the progress with your lender
• Feel comfortable being able to discuss any discrepancies
• Use “Full Disclosure” with your lender

NOLA Lending wishes you the very best in your lending process and hope that you have a fulfilling and profitable experience. If you have any questions regarding something you have seen here, or about lending in general, please feel free to contact one of our friendly agents at NOLA Lending in Covington who will be more than happy to answers any and all questions, with no obligation.

So what are you waiting for? Find out how NOLA Lending in Covington can help you today!

A mortgage loan is probably the largest loan you will ever take on, and certainly the most complex. Getting a loan these days is not easy, but with a bit of planning and preparation, you stand a better chance of getting the loan you want.

Our tips for getting the mortgage you want:

• Before you request a rate quote , do your homework. Do some looking around to see what interest rates are and begin to think about the type of loan you need. It is a good idea to use a mortgage calculator to help you to get an initial idea of how much you can afford in a monthly payment. However, read our prior blog post for a few words of caution regarding mortgage calculators.
  
• Ensure your credit report looks good and is accurate. Avoid making significant purchases at this point and pay down the debt you have. You want the best credit score possible before you apply.
• Contact a national or local financial institution, mortgage lender or credit union and request a quote. A quote should not require any cost to you, but it will tell you what the lender can offer to you. You want to compare loans from several companies.
• Determine the down payment requirements. Most lenders require 20 or more percent from homebuyers unless you obtain mortgage insurance (MI) which can drastically impact the terms of your loan.
  
• Negotiate to get the lowest interest rate possible and the terms you want. You may get the lower to cover some of the closing costs, too. The key here is to ask for the best offer possible.
• Provide all documentation to back up the details you provide on your mortgage application. You want to ensure you have the most up to date information because the lender will require verification.

Don’t try to “do it yourself”

Getting a mortgage loan is definitely not a DIY process these days. With the changes to the lending market in recent years, it’s never been more important to talk to a qualified, professional loan officer to help you make an informed decision about this important investment.

When applying for a mortgage , your lender may ask you to sign and submit a Form 4506. It is a form we get directly from the IRS which some mortgage lenders may require you to complete as part of your loan application.

What is a 4506 used for?

Form 4506 T, as it is most often requested, is also called a Request for Transcript of Tax Return. This document allows for a copy of your tax return to be obtained from the IRS directly. A mortgage lender may request this to verify your income documentation that you have provided as part of your loan application.

There are a few things to know about it.

1. This form may be necessary if you are a self-employed borrower and the lender wishes to see official documentation of your most recent earnings from the IRS.
2. This form is also used to detect fraud in cases where there is an apparent discrepancy. If there is some reason the lender does not believe your reported income is accurate, they may take steps to verify it through this manner.
3. Many mortgage companies also use this tool randomly within their business. For example, during the course of the day the lender may request a certain number of these documents. This is often for a quality control measure and those who receive the request are selected randomly.

4506 as part of the loan process

The fact that your lender has asked for a signed 4506 doesn’t necessarily mean they suspect fraud or have identified an issue with your loan.  It may simply be part of their regular process.

During any loan application, it is necessary for mortgage lenders to verify the information you provide to them.  So as a rule, when filling out documents to obtain a loan, always provide the most accurate information. Ensure that all statements you make are accurate and verifiable to avoid any problems with this step or other verification steps the lender will take.

As mortgage lenders, one question we are often asked is whether or not you can refinance a home mortgage into just one person’s name.  There are some cases where you may want to have your mortgage debt in one name only. This can be done, but it will depend upon a couple of things:

Credit Ratings

In most cases, it will require that the person who is taking the debt into their name be able to qualify for it on the basis of their credit score and income alone. The refinance, however, is secured by the property, so this isn’t quite as hard as you may think. In most cases, one member of a married couple will be able to do this without any difficulty.

What About the Title?

You should still be able to leave the title in both names, even if the refinancing is only done under one name. The refinancing is just a loan and it’s used to pay off the first mortgage. This should only affect the financing, not the actual ownership of the house from a legal standpoint.

How Do We Do It?

NOLA Lending will help you fill out all the paperwork for the refinance and get you started on the process. Changing from one name to two will usually just be a matter of letting your lender know that this is something you want to do. Beyond that, the process won’t be any different than applying for any other form of refinancing.

Before getting started though, we will check the new borrower’s credit, so that aspect of applying for the loan will not change. The only difference will be that the paperwork will contain one name rather than two and that the refinancing will be done completely against one person’s credit and income. If that person happens to have excellent credit, it may be worth it to remove someone else from the application and to have it written against the name of the person who has the better credit. The loan is secured, of course, but credit still does play a part.

Simply put, mortgage insurance (also called “PMI” or sometimes simply “MI”) is designed to provide additional security for home mortgage lenders to ensure that they’ll be insured in the event of a default. The insurance doesn’t cover the homeowner: it covers the mortgage lender or banker. Mortgage insurance is a requirement for some mortgages and, if you don’t have a large enough down payment, you’ll almost certainly have to pay for this coverage.

Why it’s Necessary

When a lender is financing 80 or more percent of the cost of your home, they’ll usually require that you have mortgage insurance. This is because they’re taking a substantial risk in providing this funding and, if you default, they need to make sure that they’re not taking all the risk.

When you apply for your first mortgage, you’ll have to count on this cost being added to the cost of your mortgage as a whole. Most lenders will not be willing to finance a home without some type of risk reduction which is what this insurance provides.

Do You Really Need This Extra Expense?

In a way, mortgage insurance is purely another cost to the homeowner. There are some potential ways that you can lessen it, however. Tax codes allow mortgage insurance to be written off of your taxes, but you’ll have to have an accountant guide you through this process to make sure that you’re doing it correctly, and confirm your income qualifies you for the deduction.

You should also keep in mind that the mortgage insurance may be the only thing that’s even making it possible for you to buy your home. When the lender is putting down over 80% of the purchase price to secure the property, they’re taking a lot of risk. It makes sense for them to demand some way to make sure that they’re not taking on the full amount of that risk and, with mortgage insurance, it’s lessened for them somewhat.

Avoiding Mortgage Insurance

The only way to avoid paying for mortgage insurance is to offer a bigger down payment on your home – typically at least 20%. If you can do this, the lender will forego the requirement for the mortgage insurance. If not, however, you’ll have to factor this cost into the total cost of your mortgage.  There are also options for PMI buyouts, single premium or buy downs for discounted premiums monthly.  You should discuss these options with your NOLA loan advisor.

The laws that govern mortgage insurance have been changed a bit to make it a more valuable product for consumers and easier to understand. While it may seem like something of a disappointment to have to add this onto your payment for your home, it does make it possible for many people to get the home they want with smaller down payments.