The “Time” I want to talk to you about is “Turn Times” from your lender. The Turn Time is the amount of time, usually measured in days (sometimes hours) that it will take for your loan to be pre-approved, submitted & underwritten, conditions signed off, documents printed to sign, documents reviewed & loan funded.
Turn Times are a measure of the efficiency of your lender. There are many things that can delay, postpone and even bring your loan to a screeching halt. If this is the case however, the measure of efficiency is how quickly and accurately you are informed of the challenges.
Once your offer to purchase is accepted, the clock starts ticking….tick….tick….tick….tick….on your escrow period. A typical escrow period is 30 days. You have 30 days to complete the financing process with your lender.
There are two basic “approval processes” happening at once here. The first is the approval of the buyer. The lender will require certain income and asset documents from you to submit to the underwriter for final approval.
The second process is the approval of the property – this includes the appriasal, home inspections and condo certification if it’s a condominium or townhome.
Both of these approval processes are a Race Against Time to meet your “Contingency Period” and your “Close of Escrow” dates.
I feel like i’m weaving a complicated web…Let’s start by understanding the Buyer Approval first.
Hopefully, your lender gave you a Loan Approval prior to you making offers on homes. A Loan Approval should have required that you submit all of your most current income and asset documentation as well as complete a loan application.
Many Lenders and Brokers will simply give you a pre-qualification based on much less information. This does you no good at all and could cost you significantly in regards to time and maybe money if this irresponsible act is passed off as an actual loan approval.
When the Lender receives all of the requested information, it should be forwarded to an underwriter to submit to the automated underwriting decision engine which is usually Fannie Mae DU, FHA TOTAL scorecard, VA or USDA GUS.
Once you are approved, you lender should be able to provide you with a copy of the underwriting approval, not just a letter stating that you are approved. Get it in writing!
This is your conditional approval, we call it a TBD – which means the buyer is conditionally approved and the property is “To Be Determined”.
The loan is not actually fully approved until all of the buyer’s conditions and the property is approved and eligible for financing.
The property approval. Once you open escrow, an appraisal is ordered on the property. This is also your opportunity to order a home inspection as well as do any other inspections or due dilligence to determine that there are no “surprises” with the home you are buying.
The appraisal, depending on your financing will determine the eligiblity of the condition of the property to be used as collatoral for the loan you are applying for and it’s fair market value.
Remember the “Race Against Time” I mentioned above? Here is essentially the potential penalties for not winning this race:
- If you miss your contingency time – you risk losing your good faith deposit
- If you miss your close of escrow – you risk losing your good faith deposit, your home and possibly even be penalized at a rate of $50 to $300 a day if you close escrow late
- If your lender does not provide you with a copy of the underwriting approval initially…. you may not be approved!
- If you do not have the final approval from you lender in 7 to 10 days….there may be a problem!
- If you do not have the appraisal ordered within 5-7 business days after opening escrow….you are flirting with delays!
- If you do not sign your loan documents 5-7 days before the close of escrow…you may not close on time!
These numbers are only approximate turn times. Market conditions can easily affect turn times. If interest rates suddenly drop or some other market condition that significantly increases the number of loan applications, you can expect turn times to take longer.
Current turn times at Broadview Mortgage (they are posted daily) are real time indications of the oldest file in the system and are as follows:
- Final Underwriting: 6 days 19 hours
- Signing off Conditions: 48 hours
- Loan Documents (after ordered): 24 hours
In conclusion – understanding the importance of turn times will help you to manage your expectations as well as give you an opportunity to make other arrangements should your lender drop the ball like they did with Ray Homebuyer.
It is quite common (we get a LOT of these calls!) to change lenders or just get a second opinion if your current lender is not performing up to par with turn times.
It is obviously best to act fast if you suspect that there is a problem that you’re not be told about, but in most cases, we have been able to save buyer’s from losing thier homes with less than a couple weeks notice.
Also, these time lines and contingencies do not always guarantee that you will lose money or your home – It is quite common for sellers to work with you and be patient should you encounter challenges with your lender as long as you’re approved and in good hands moving forward.
Trust me, we get this alot! But don’t take my word for it – Check out what Liz had to say:
I am SO glad I found this site. My 1st lender misinformed me about CalSTRS and wouldn’t provide me with a GFE or my pre-approval letter. My 2nd lender didn’t deliver on his promises, either. The entire time I kept referring to this site for the info. I wasn’t getting from my lenders. At one point, I posted a question, and [Broadview] answered and referred me to loan officer John Evans. Even though I wasn’t applying for a loan, John took my calls and answered all my questions. Finally, I got smart and now Katella Broadview is my lender. It’s been a smooth groove since.by liz on 10/08/2009
Thanks for taking the time to write this Liz 🙂