The recovery of the market means longer turn times for loan approvals

Are lenders (and buyers) prepared for an upswing?

Home sales upswing

There is a “perfect storm” on the horizon that may open the flood gates and result in many first time home buyers reaching a tipping point and entering into the real estate market to take advantage of (a) expiring federal tax credits, (b) affordable home prices and (c) record low (and steadily rising) interest rates.

The perfect storm for affordability is not necessarily a perfect scenario for lenders or real estate agents and it can be down right frustrating for new home buyers trying to close escrow on the home of their dreams.

Ok, let me explain a little bit better what I’m talking about here.  The past 18 months have been very volatile and extremely stagnant in regards to home sales.  Many lenders and mortgage brokers have gone out of business.  Many of the lenders that are left have reduced their staff or reassigned them to “loss mitigation” work – trying to process the high volume of loan modification requests and foreclosure actions against distressed home owners that can no longer afford to make their payments.

Herein lies the challenge that we are just now starting to see the beginning of…….Turn times.  Turn times?  That sounds like something  a ballet dancer would be concerned with right?  Well, there’s some dancing going on here but it’s not nearly as graceful or beautiful to watch as an accomplished ballet dancer.  Turn times are the amount of time it takes for a lender to process your loan approval.

It is not uncommon right now for one of the major banks to take 30 days or more just to get you a loan approval.  I have heard stories of lenders not offering government FHA loans because it will take 60 days plus to process a loan.  My educated guess is that it’s going to get much worse before it gets better.  Home buyers have not yet begun to take advantage of home prices, many believe that prices are still coming down.  My experience is that in the areas that are “hot” right now – it’s very difficult to not only get an offer accepted, but when you throw into the mix that you might not be able to get your financing completed for 60 to 90 days…you can throw out any possibility of getting an offer accepted if you ask for a 60-90 day escrow on the initial offer.

Here are some helpful tips to prepare you for potential delays when trying to get your loan approved:

• Communicate with your Real Estate Agent about the “activity level” in the area.  If there are many, many offers on homes in your area you can expect that sellers are going to be less flexible when it comes to accepting longer turn times.
• If you get your offer accepted, carefully review the contract for any penalties if the close of escrow is delayed.  If there is a $300 a day charge to you for every day the close of escrow is delayed, you may want to negotiate that point to accommodate for what turn times are “typical” for the market.  If the market is producing slow approval times, you will not be the only one experiencing it.
• Communicate with your loan officer or lender about their company’s current turn times.  Don’t take their word for it necessarily, see if it’s published somewhere.  I know that our turn times are a constant juggling act as applications for loans fluctuate with the market and they are published to the hour on each loan approval we underwrite.
• Lastly, and most importantly – make sure you get everything to the lender as soon as they ask for it.  Every day the process is delayed is a day that you may miss sorely as the contractual close of escrow draws nearer.

Turn times are just one more aspect of the home buying process that often times goes unexplained until you find yourself struggling to meet a deadline and you’re looking for answers.  Educating yourself about the home buying process is a huge step toward avoiding common mistakes that less informed home buyers make.  Get educated and be empowered!

If you haven’t already attended one of our homeownership education webinars, here is a schedule of upcoming live, on-line classes that will help prepare you on your home buying journey.

Go here to see a Complete Schedule of upcoming Homeownership Education classes

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2. If Your Loan Officer Says You No Longer Qualify for a Teacher Loan….Read this! Ok, it’s come to the point where I can no longer brush this off as a coincidence.  The conversation that...
3. Getting Pre-Approved for a Home Loan vs. Being Pre-Qualified What’s the difference? This is a question we get quite often. In some cases, this is a just a question...

Tagged as: home buyer education, understanding the home buying process, underwiriting turn times