If you have tried to get a loan in the past 90 days, you have seen some changes in the way approval is carried out. These changes are part of a new government initiative called TRID that is aimed at protecting the borrower. While the increased documentation does a great job in protecting the consumer, it has also added on days, and – in some cases weeks – to the approval process. Instead of closing under 30 days, the average loan approval process is approaching 45 days. To close your loan as quickly as possible, you need to do your part.
How To Improve Your Real Estate Loan Approval Timetable
Here are a few simple tips to get your loan approved as quickly as possible:
1. Organize Your Finances: The loan approval process is made up of three basic areas: income, assets and employment. Your credit score is another major factor, but it is in a distant fourth place behind these three. Most real estate investors do not have traditional W2 income statements, unless it is one of their first few deals. If so, you get off easy and just need to supply two years of W2’s. Seasoned investors, however, need to supply two years’ worth of full tax returns. Sending over the adjusted gross income page is not enough. Your lender will need to see all schedules and attachments, even if they have little bearing on the approval. Additionally, they will need two full months of bank statements. If you have transferred funds to one account, they will need to see statements showing where those funds came from. Any withdrawal over a few hundred dollars needs to be verified and justified. Most mortgage brokers or lenders will tell you that a majority of these items are excessive, but they are still required by the lender. These are the items that can tack on weeks to your approval. The loan items will not be reviewed until everything is included, or every time there is an update your loan goes back to the bottom of the pile. Before you submit anything, collect all the financials and put them in a separate file.
2. Gather Property Documentation: Getting a real estate loan with multiple properties does not have to be frustrating; that is, if you are organized. Although the task can be daunting, take each property individually. Start with any leases there may be on the property. If the rent checks are deposited into a different account than what you are using for the down payment, you may need to supply two months of statements for the account in question. You should also get any tax and insurance information you have. If they are included in the monthly payment, an updated mortgage statement may suffice. If not, you will have to supply a recent tax bill and the homeowners declaration page. The property may also be free and clear. This can be included on one of the schedules of your tax return or on your homeowner’s insurance bill. You may also be able to show the settlement statement from the closing if you paid cash. This process can get time consuming when there are multiple properties involved. However, all of the items for the property are necessary. The quicker you can get them together, the faster you can close.
3. Present Personal Items: There are still a handful of personal items that are required. Start with the most basic: Your license, which, not surprisingly, must be up to date. You also need to supply a business license if your business requires one. Depending on how you are allowed to close, it is a good idea to keep your LLC paperwork handy. You should also have your inspection ready to go, and your attorney ready to order title. There are many attorneys who will not order title unless they receive a preliminary approval from the lender. A good relationship with your attorney will get this ball rolling as soon as the application is submitted.
As prepared as you may be, inevitably there will be items that you overlook or omit. Your lender may ask for something that catches you by surprise. Instead of arguing with your lender, you should move to act as quickly as you can. Every time you send something in piecemeal, your loan goes back to the bottom of the pile. It is not uncommon to have to wait a few days before even the simplest item gets reviewed. There are now rules in place that permit you from closing until three days after you have received closing documents. Every day that you argue about an item needed is a day lost. This can cause you to miss your mortgage contingency date, which could possibly cause you to lose the deal.
The mortgage closing process is not going to change any time soon. As simple as it sounds, the best thing you can do is send everything that is required at once. It may take a few extra days to accumulate all of the financials, property and personal documentation, but doing this will help close your deal as quickly as possible.