Anyone who has ridden the homebuying merry-go-round can attest to the frustration of finalizing a home loan. After all, you’ve found the perfect house, settled on a price, submitted a stack of documents, and then you’re forced to wait… and wait, and wait. The whole process leaves you wondering why on earth it’s so complicated and where on earth you can find the fastest home loan.
Considering that the average closing length has increased yet again – currently hovering around 46 days, it’s easy to see how the wait can weigh on an anxious homebuyer’s patience. So, what is the fastest closing that a buyer can realistically expect, and where do you find it?
Why Home Loans Take So Long
Waiting to get the keys to a property can seem like an eternity – and a delayed process could even result in you losing out on your dream home. Before we delve into the fastest home loans available and who offers them, let’s talk about why they take so long in the first place. There are many moving pieces involved, most of which are actually in place to protect you, the consumer.
First and foremost, the lender needs to document and verify a homebuyer’s ability to repay a loan. Thanks to the 2007-08 housing crisis, and new Consumer Financial Protection Bureau (CFPB) regulations put into place in 2014, the process has changed quite a bit in recent years. There are much more stringent financial guidelines today, particularly if you are obtaining a larger balance jumbo loan. This is an attempt to reduce the risk of consumers buying homes that they can’t truly afford, then defaulting on their home loans.
Second, mortgage lenders must now adhere to more rigid rules regarding home appraisals. This can add an additional delay to the lending process, as appraisal management companies have strict, lengthy guidelines to follow. Of course, this also protects the buyer as they can rest assured that their new home’s value supports what they are paying for the property.
All of this is in addition to the typical homebuying delays, such as waiting weeks for tax transcripts to be returned by the IRS, employment verification delays, and the time it may take to ensure that the home has a clean title.
How Lenders Are Speeding Up the Process
Believe it or not, lenders are just as eager to close on your house as you are. The last thing they want to do is drag you through a long and painful process. Plus, they don’t start making money on your loan until the dotted line is signed, and they certainly don’t benefit if you lose out on your dream home.
So, it makes sense that some companies, like Neat Capital, are doing everything in their power to make it faster and easier to finalize a home loan.
Here are a few of the tactics being employed today to not just nudge the closing process along, but to truly accelerate it.
• Digitizing the Process
Thanks to electronic data collection, many mortgage companies today are moving away from paper. This speeds the loan process along by allowing borrowers to instantly submit their applications, link accounts, upload supporting documents, and follow along with the status of their loan. Documents are easily moved from loan processor to underwriter, and additional paperwork can be requested and quickly obtained from the borrower.
The easiest way to speed a mortgage along is to make it underwriter-ready. This means validating as much information as possible before the loan application is passed to the underwriter, or mortgage gatekeeper, to get their approval. That’s why many lenders are turning to online platforms, which expedite the process even further by automating the validation process.
If you want to improve your chances of a shorter loan closing, be sure to ask if your lender utilizes digital applications, account linking, and other loan automation tools.
• Real-Time Underwriting
The concept of a real-time underwriting process is a unique, yet profoundly impactful, one. It’s also turning the mortgage lending industry on its head by reducing average loan closing timelines by more than 50%.
Traditionally, the underwriting process involves a repetitive cycle of gathering additional documentation from the borrower, reviewing that information, and then requesting more information based on the new information recently provided. After a few cycles of document collection and review, the underwriter eventually gets comfortable that they have collected enough information to determine whether to approve or decline the loan in question. This is traditionally done via human touch over the course of a few weeks following a borrower’s loan application.
Currently, Neat Capital is the only lender that streamlines the cumbersome documentation review with real-time underwriting technology. This cutting-edge method completely goes against the grain: rather than a quick, three-minute “lightning-fast” online application, Neat Capital asks a bit more of you from the jump. Our application takes closer to 20-25 minutes to complete, giving you real-time feedback on your loan qualification. This means that by the time you press Submit, 90% of the processing and underwriting for your loan is complete, and you will know exactly where you stand. This not only results in an easier process for you but knocks weeks off of the loan approval timeline… which is why Neat Capital boasts their readiness to close loans in an average of 15 days. Even more impressive, Neat Capital is able to close the more complex larger balance loans in a similar timeframe. Showing that you can close earlier when bidding on a home allows you to present a more powerful offer, knowing your financing is certain. Your offer becomes just as reliable as an all-cash offer. Who wouldn't want that boost in negotiation power?
• Fannie Mae Day 1 Certainty™
Some mortgage companies are using other underwriting tools to attempt to shorten the origination process and bolster confidence in the loans they issue. This makes getting a mortgage both easier and faster.
Introduced in late 2016, the Fannie Mae Day 1 Certainty™ initiative seeks to provide added protection to lenders. It encourages them to not only have the security to offer mortgages to more buyers but also has the added benefit of speeding up the homebuying process.
With Day 1 Certainty, Fannie Mae provides the lending community with tools to help them validate income, assets, and employment for borrowers. It offers property inspection waivers for certain refinanced home loans, so that underwriters can move approval along and focus more of their attention on high-risk borrowers. The program also utilizes electronic data collection, eliminating the need for most of the mortgage-typical documents (including paper pay stubs and bank statements).
So, Who Offers the Fastest Home Loan?
Now, back to our original question: where can you secure the fastest home mortgage available?
If you were to ask a potential lender, they would likely boast timeframes as low as 12-15 days. And, they’ve all probably done it before… once or twice. It’s important to note, though, that these are their best-case scenarios.
Even with the utilization of cloud-based applications and automated underwriting, the industry average still hovers around 45 days for a home mortgage closing. This means that for every one of those 12-15 day closings you’re quoted, there’s someone out there waiting 75 days or more.
While you should certainly ask what tools mortgage lenders are using to speed your application process along, you should also ask them about their average time to a mortgage closing. This is a much better gauge and will give you a clearer idea of how long you can expect your home loan process to take with them.
We strive to make homebuying quick and stress-free here. When we say that our mortgages take 15 days to complete, we aren’t talking about our best-case scenario: that’s the average amount of time it takes us to finish the process! This is 3x faster than the industry average, and yet we do it every single day.
We provide features such as the Platinum Pre-Approval, which makes our borrowers’ offers just as enticing to sellers as an ‘all-cash’ offer. Combined with our proprietary real-time underwriting engine, this serves to speed along the closing process even further.
If you want to remove the anxiety and frustration when getting your mortgage, contact us. We’ll show you how Neat Capital can make your next home loan the most enjoyable one possible.