Your Mortgage: The life of a loan

Mike Miles

By Mike Miles

The life of a mortgage loan can be a hard one. It can be a fast-paced roller coaster full of emotions, stress, numbers, guidelines, compliance rules and arguing with underwriters, all abruptly ending on one glorious closing day. Once that day is over (in most cases), the loan’s life is mostly forgotten about. Everyone the loan ever knew (buyers, loan officers, processors, closers, underwriters) simply continues living their lives and pouring time and attention into other loans. That’s how it goes, the life of a loan.

Okay, but enough dorky humor for one day. Below is a quick look at a loan’s life cycle at various stages, taking into account a buyer who has a house picked out and is ready to make an offer.

Loan Application/pre-approval: (1 hour to 1 day)

For any buyer doing a complete pre-approval (which involves completing a loan application, generally speaking), it generally takes about 20-30 minutes of time to complete the application part of the process. Whether the loan app is done online digitally, over the phone, or in person, it’s about 20-30 minutes’ worth of questions and answers. The pre-approval portion is completed by the loan officer and can take anywhere from 15 minutes to several hours depending on the complexity of the situation.

Loan Signatures/Pre-Processing: (1 day to 4 days)

Once the loan application is finished, it will go through a series of compliance checks. Once finished with compliance, loan disclosures are sent for signatures along with a short list of documents anticipated being needed for underwriting. Loan disclosures themselves take less than one hour to be signed, but most borrowers sign digitally and on their own schedules, meaning it takes them a few days to finish the loan signatures.

Processing (pre-underwriting): (1 to 2 days)

This is where the loan is generally handed off from the loan officer to a support person (team) to scrub the file in preparation for underwriting, and it generally reaches this stage once signed disclosures are retrieved. There are dozens of tasks completed in-house by processors to get it cleaned up and organized for underwriting. Underwriters don’t like messy files as they create lots of questions and stress for everyone.

Underwriting: (7-18 days)

This is the bulk of the time spent in a life’s loan at one stage. Depending on the loan product, complexity, underwriter’s workload, and condition of the property, this stage can be quick or can be drawn out. Surprisingly, appraisals are one of the largest time sucks during this stage, taking an average of about 10 days to be finished (ordered, scheduled and completed). Underwriting can’t be done without the appraisal being accounted for. For purchases, appraisals are not ordered until real estate agents give the green light, something that generally occurs once the inspection/resolution period has passed. That means an appraisal may not be able to be ordered until about day 10-15 of the contract, something that can really compress the loan’s life cycle.

Pre-closing: (1-3 days)

Once a loan is finished (or nearly so) with underwriting, it moves toward closing, and the lender will prepare it to close. Compliance requires that buyers/borrowers be furnished with a document called a Closing Disclosure at least three days prior to closing. This is meant to give borrowers enough time to review closing figures and details, and while it doesn’t sound complicated to create this document, it can be. The closing disclosure actually bounces back and forth between the lender and title company several times before it’s fully balanced.

Closing: (1 hour)

The actual closing doesn’t take long at all. This is the point where borrowers are sitting with a closer from the title company signing all the documents. The title company spends multiple hours preparing for this closing but the appointment itself lasts about an hour.

Post-closing: (5 – 14 days)

Luckily, this part doesn’t involved borrowers. Most people think that when a loan is closed all is done, but that’s not the case. The loan has to travel through several rounds of compliance tests, plus another round of underwriting to ensure the originating, processing, and underwriting teams didn’t miss anything.

A loan’s life can be really short, or it can be quite lengthy. No offense to loans, but everyone loves when they have short lives. It’s not that we don’t like loans – we love loans – but we love closings more!

This weekly Sponsored Column is written by Mike Miles of Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and thus empowering, clients to make the best financial decision possible for their situation. Contact Fountain Mortgage today.

Mike Miles NMLS ID: 265927; Fountain Mortgage NMLS: 1138268