If you have ever purchased a home in Houston, the most stressful part of the process is securing your financing. How much money do I need to bring to closing? What kind of loan will I be getting? Will I get approved for a mortgage? Will I have the approval in time? Will there be hidden fees? And more important, how do you avoid delayed closing due to lender.
You are very excited as you just signed a contract with a Seller to purchase their home. You have the sales price agreed upon, a closing date set and you are ready to proceed. In the past, many Buyer would be starting their mortgage process at this point. Today, this would be much too late.
Most Realtors agree Buyers should start the process weeks if not months before they find that perfect home! The two biggest reasons for delayed closing due to lender is a) Buyer not staying in-touch with their lender and b) changes to the contract that are not communicated to the lender.
And to add another level of confusion, as of Oct 3rd, 2015 the mortgage process has been completely modified with the hopes of making the process smoother for the consumer. What you need to know as a Buyer is there will be steps you need to follow to keep the process going forward as you work your way to closing. From shopping between lenders, review closing cost, finding out the latest interest rates to signing disclosures, all will need to be addressed in a timely matter or delays will occur.
The Consumer Financial Protection Bureau (or CFPB) is heading up the process. You can learn more by visiting their web site. The Realtor you will be working with is also on a learning curve regarding the new rules. They, along with the loan officers, title companies and others are all learning the new process for a Buyer to get a new mortgage. Because of the new rules, lenders are asking Buyers to give them a bit more time to process their loans. 30 day closing will likely not be practical for awhile. All parties should plan for 45-60 day closing until the process gets more familiar.
Five steps to keep in mind when obtaining a home mortgage under new TILA-RESPA rules.
- Speak to two or more lenders early on before you start house hunting. Understand what you can afford, knowing your your credit score and more is what you will be learning. A Realtor can refer you to outstanding lenders in Houston. And keep in mind this does not have to be a mega bank like Wells Fargo or Chase. A local Houston mortgage broker or a Houston credit union can help.
Once you have signed a contract to purchase a home, speak to multiple lenders and apply for a Loan Estimate quickly. The Loan Estimate is a standardized form allowing you to compare the lenders and what they are offering in regards to interest rates and closing cost.
- Once you are happy with one of the lenders, indicate to them your ready to proceed. Some disclosures will need to be signed and the clock starts ticking.
- Keep the lender updated with any changes in the contract or your financial situation. With help from your Realtor, you will provide them information like property taxes, HOA dues, insurance cost, etc to assist them with completing your loan. Timely communication is key!
- Once the loan is approved, a Closing Disclosure (the old HUD-1) will be created. This should look identical to the Loan Estimate you received early on. If these don’t match, corrections can be made so no last minute delays with your loan.
The goal of these changes is to remove many unnecessary documents, make it easier to compare loans from one lender to another and allow you to review your final mortgage documents days before closing…not hours or minutes. To keep the process moving smoothly with little or no delays, you need to stay in close contact with your lender and Realtor. Send requested documents to the lender in hours, not days. Sign disclosures when asked. And finally any changes to the contract between Buyer and Seller need to be disclosed quickly to all parties.
Despite your attention to detail, there still can be delayed closing due to lender. Plan for worst case scenarios with the help of your Realtor so your not caught in a situation that will cost you extra money or worst, losing the home you wish to purchase. Being prepared ahead of time will help all parties in making your home purchase an exciting event with no surprises.
For more information on getting a home mortgage in Houston, please contact your Houston real estate expert Mark McNitt at 832-567-4357.