Have you noticed the sudden plethora of advertisements that promise “mortgages with the push of a button,” or “we’ll close your loan in just 10 days?” They’re suddenly everywhere. And like most things in life, if it sounds too good to be true- it’s not.
Let’s address the first claim. Could you really get a mortgage with the push of a button on your smartphone? Well, you could certainly get pre-approved by answering a few basic questions. That’s true with most lenders. But pre-approval simply means that you’ve provided some information and the lender used that information to estimate if you qualify for various loan products and how much you can afford. Nothing at this stage is verified, analyzed, or approved by an underwriter, which is ultimately required for any mortgage loan.
Preying on people’s perceptions that getting a mortgage or refinancing involves mountains of paperwork and weeks of hassle, these companies are also hoping to set themselves apart by claiming to have a faster and easier process that eliminates paper. But it’s 2021, and every lender can collect the necessary documentation such as paystubs, bank statements, and tax returns via email or digital upload. Yes, despite what these misleading ads say, verified documentation is still a necessary part of every loan or refinance.
My bigger concern is the second claim regarding the length of time it takes to close a loan. Could you really close your mortgage loan in 10 days? I’m all for increasing efficiency by utilizing improved technology but let’s get real here … a mortgage loan can only be closed in 10 days if you start counting days well after the initial phone call or contact with the lender. I’ll explain why.
Let’s use an average purchase transaction as our example. To help illustrate the typical timing involved, I’ll identify ordinary transaction milestones and the number of days associated.
Offer and contract acceptance
- 1 to 2 days
Buyer’s inspection & resolution
- 10 to 14 days following contract
- 3 to 10 days following resolutions
*The appraisal typically isn’t ordered until after the resolution period has passed as there would be little reason for a buyer to waste money on an appraisal if contract negotiations based off home inspections fall apart.
- 4 to 10 days
**Underwriting starts during the inspection and resolution period but it can’t be completed until after the collateral (appraisal) is completed.
Final compliance and closing
- 1 to 5 days
As you can see, there are about 19 to 41 days involved with these milestones. And unless a buyer waived the right to an inspection (a very bad idea), there is virtually no way a loan could be closed in 10 days. Perhaps these advertisers are counting Day 1 as the day the appraisal is ordered? In that case, sure it’s possible. But I doubt that’s what borrowers have in mind when they call for their “10 day closing.”
Companies that say loans can be done in about 10 days aren’t doing anyone any favors. It misleads borrowers and sets false expectations for all involved. These types of companies only want your transaction and not you as a loyal client. These companies know that once you go through the trouble of completing the necessary loan tasks, you will most likely stay throughout the process because you’ve already come this far, knowing there is virtually no way they can honor the commitment as advertised. They take this in exchange for your total stress and anxiety.
Additionally, I’m not aware of situations where borrowers are forced to close in as little as 10 days. Buyers and sellers expect the process to take about 30 days from start to finish, so I’m confused as to why these companies feel the need to send messages that closing in 10 days is important. Unfortunately, most borrowers find out the hard way that a quick mortgage that requires no documentation, appraisal, or underwriting process is just what it sounds like – a dream.
What is important is for borrowers to understand is that mortgage loans can be stress-free. To experience this, borrowers should be using a company that leverages technology to enhance efficiency but still employs dedication to transparency, communication and personal client service. You can also reduce your stress by working with a local lender with whom you can build a relationship and call directly throughout the process without the vast maze that comes along with big banks and national lenders. If you’d like a no-cost consultation on a stress-free purchase or refinance loan, give me a call. No phone tree required.
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 today.
Mike Miles NMLS ID: 265927; Fountain Mortgage NMLS: 1138268