Getting a mortgage for a home purchase can be a daunting task to the uninitiated, but it pays to understand the process upfront and pick the right mortgage companies to work with to ensure a quick closing.
When getting a mortgage, there are three key individuals in the process: the loan officer, the loan processor and an underwriter. Your interface to the lender is a loan officer, sometimes called an account manager, mortgage banker or relationship manager. Their job is to collect a complete and accurate loan application package from the borrower, and provide quotes and estimates of your loan terms. Loan officers usually have a processor that helps them to gather, submit and track application status along the way. The other key person in the mortgage process is the underwriter. The underwriter reviews loan files to see if they fall within the bank’s lending guidelines and are the ones who will ultimately approve or deny a loan application.
Where is My Loan Being Underwritten?
If a loan application is going to be delayed, it is going to happen while waiting for underwriting to review the file. Some lenders have a local team that can take your application and approve your loan in the same local office. Other lenders centralize loan processing and underwriting in offices in other states. I will let you guess which of these two models is more efficient at approving loans. Without fail, the loans that I see get delayed are the ones that have to go to these central processing facilities. Most of them enter a black box, with no clear timelines for review. It is sometimes difficult to reach anyone who can provide a loan status, and you end up waiting your turn in the queue. Time zone differences with the underwriting department can also be your enemy in this process.
Local underwriting helps alleviate these sorts of delays. It is not to say that local underwriters cannot also get overwhelmed with transaction files and cause delays, but they are in more direct contact with the loan officer and can do a better job at communicating timelines and prioritizing files that are in danger of being late. Given a choice, you should opt for loans that are processed at least in the same time zone and preferably locally.
Surprisingly, the size of bank has little to do with how their loan processing is setup. Some large banks use local teams, while other use regional or national processing centers.
Choosing the Right Mortgage Professional
You have countless choices of loan officers, but many buyers make a critical mistake and simply walk into their local bank branch to apply for a home loan. In-branch loan officers often wear many hats taking loan applications, opening checking accounts and processing deposits. Anything not mortgage-related is a distraction, and you are best served by loan officers who do mortgages for a living. If you walk into a bank branch, ask for a referral to one of their loan officers who doesn’t have to worry about branch duties.
Mortgage brokers also present an interesting wrinkle in this discussion. Mortgage brokers do not originate loans, but simply act to broker your loan application to an appropriate mortgage lender. There are quality mortgage brokers out there, but they add another layer of complexity and communication to the process. Your mortgage broker will submit your application to a wholesale mortgage rep at the lender, who acts as their point of contact for processing your loan. That rep then works with a processor and underwriter to get the loan approved. When things go wrong and get delayed, the additional layer of communication does present challenges.
Ask the Right Questions Before Applying for Your Mortgage
Nothing is more painful than loan delays when closing the purchase of your home. One way to avoid them is to ask the right questions, which almost no one does.
- Where is my loan going to be processed and underwritten?
- What is your current turnaround time for loan underwriting?
- Do you have a mechanism for escalating files that are in jeopardy of being delayed?
- Can you provide statistics on what percentage of loans you close on time?
- Will you provide any guarantees or fee reductions if my loan is late?
By asking the right questions upfront, you can avoid painful loan delays at the back end of the home buying process.