Tips to Speed up the Mortgage Application Process
It can take several weeks, a month, or months in some cases, for a home loan application to become fully approved. If there are any holidays thrown in the mix, the process will take even longer. If you are looking to purchase a home soon, there are several steps you can do before applying and things you can do during the final approval time to speed up the mortgage application process.
1. Lower credit card and other debt balances
Before you get started with the home buying process, it is a good idea to take a close look at your debt. The less debt you have when applying for a mortgage means you stand a greater chance of qualifying for a good loan. Credit card balances can be paid down as well as car loans and any personal loans you may have accumulated. When paying off credit cards, it is not always necessary to close the card out entirely because having a well-established credit account in good standing is a good thing to have on a home loan application.
2. Do not apply for more credit
When applying for a mortgage, the last thing you need is more debt. Avoid applying for any credit cards or loans until the escrow closes. If you apply for credit while the application is being processed, the process will be stalled, or it may even kill the deal altogether. The lender will see the credit application while they are evaluating your packet, and once they see the new request for credit, they will have to factor in the new data and begin the process again. Avoid all types of credit cards, including bank, store, and gas cards. Do not get a car loan, incur any student debt, or purchase any furniture or appliances on credit. Wait until the escrow has completely closed and recorded.
3. Save money
You do not need a big down payment to get a mortgage, but if you have more savings, it gives you many more options. You can use the extra money to put down a larger deposit on the mortgage, which can help you qualify for a lower interest rate and smaller monthly payments. Putting at least 20% down on a mortgage will eliminate private mortgage insurance (PMI). PMI is an insurance that you will pay for each month. It is rolled into your monthly payment, and it covers the lender (not you) in the event you cannot pay the loan and you default. The lender will allow you to put down less than 20%, but in exchange, the lender will want you to insure them, so having plenty of savings could save you a lot of money in the long run.
In addition to using the cash for the down payment, a lender will require you to have enough money set aside to pay several months of the mortgage payment. This is called your reserve.
4. Know your credit score
Know your credit score before you apply for a home loan. An individual is allowed to one free credit report every year. There are three established credit bureaus:
Each company must give you one free report if you request one. Effectively, you can get three reports a year. For this situation, pull one report, and see if there are any discrepancies or errors. Some issues to look for on your credit report are:
- Inaccurate delinquencies or late payments
- Incorrect spellings
- Open accounts that are actually closed
- Wrong balances or loan limits
To correct any errors, you must dispute it in writing to the credit bureau. Once the bureau has received your request, they have 30 days to respond. As you can see, clearing up credit issues may take some time, so if you want to do everything possible to speed up the mortgage process, pull a credit report early on.
5. Gather and prepare financial documents
You are going to be responsible for providing a lot of paperwork over and over again throughout the entire process. The lenders will be asking you for updated statements frequently. Before applying, get a checklist of the documents you will need to provide, and start keeping them in a file where you can access them quickly. When the lender calls for them, you can easily pull them out and deliver them. When you first begin the application the lender will want to see several months of past statements, so start gathering them early and go back several months. Some of the documents you will need are:
- Paycheck Stubs
- Savings and checking account statements
- Two years worth of tax returns
- Investment statements
- Life insurance policies
One thing you can do to make sure the home buying process goes as quickly and smoothly as possible is to check details on all the paperwork you will be signing. Simple errors can create big headaches. When making an offer to purchase property, make sure the spelling on the contract will be exactly the same as the spelling on your loan application. This will make things easier. Other things to verify before signing are:
- Social security numbers
- Dollar amounts
Buying real estate is an exciting process, but it does take time. To make it simpler try to plan and prepare as much as you can ahead of time, and use these six tips to help speed up the mortgage application process.