When they want to use financing to buy it, the process has just begun -

Today we're discussing the process and timeline of buyers applying for financing, receiving loan approval, then ending up at the closing table.

Since many Realtors� feel financing can cause undue delays and complications,

I thought I'd present a realistic standard to help offset some of those concerns.

Getting a timely approval and loan commitment is a joint effort between buyers and their Loan Originator.

In earlier newsletters, we discussed the various factors that go into qualifying for a mortgage loan, so I won't repeat the borrower, property, and transaction variables. We're looking at the broader picture today.

Get a jump on this timeline and make everyone's job immensely easier - be sure your buyers are pre-approved by a knowledgeable local lender (like me!) when they submit an offer. Sellers look at offers from pre-approved buyers much more seriously.

However, in order for me to have something to write about this week, we're going to say your buyers are NOT pre-approved and just had an offer accepted on a property you recently

showed them.

When this is the case (no pre-approval), to be safe use a

30-day financing contingency and a 37-day projected closing.

"On or before" in front of a contract date is a nice touch

that helps sellers feel more comfortable.

Important: Any buyer credit report issues must be addressed before loan application for this timeline to be dependable.

Week 1

1) Buyers gather documents needed to support

their loan application

My Application Checklist is helpful for this. Also see my Streamlined PreApproval Checklist. Many of you already have copies of these. For newer readers, if you'd like to send either one to your lookers and buyers, there's a link further down this page on the right.

This is also the time for buyers to start arranging money transfers for down payment and closing costs.

2) Complete the mortgage application

I go through the borrowers' documentation, pull the credit

report, fill in the application based on what I see in the docs

and credit report, then get together with them to fill in the

remaining blanks.

Many of the buyers with whom I deal prefer being guided through the application. They don't seem to like entering personal details on an impersonal lender's website on their own. I guess it's a comfort level thing for them.

3) Generate the full application and required

disclosures for buyer/borrower signatures

Included are the Good Faith Estimate of closing costs and Truth In Lending statements, other disclosures specific to the

transaction, payment authorization for the appraisal, and the buyers' intent document to go forward with the loan

process.

Now, we can have buyers E-sign most of the paperwork involved with a mortgage. This is very convenient, especially when the buyer happens to be some distance away from South Florida at the time. E-sign software provides some of the highest encryption security available today.

Week 2

4) Process the completed application - verify income, employment, bank accounts, property owned, debts, and other supporting info

During processing, we determine which documents,

statements, and explanations are needed to clarify or reinforce

what we already have.

It's important for borrowers to provide these

followups as quickly as possible.

Processors get the completed application ready for submission to underwriting, double-check income ratios and other calculations, and use an Automated Underwriting System (risk analysis software) to determine preliminary approval.

While we're processing the application in our office, the appraisal is being scheduled and completed by the Appraisal Management Company, the closing title company or attorneys office is handling their end of things, and your buyer is arranging all necessary insurance coverage that must be in place before final underwriting approval.

Week 3

5) Underwriting

Underwriters are trained to evaluate the risk a lender is accepting if the loan is approved and funded. All lenders have guidelines that allow them to manage this risk, and underwriters make sure these guidelines are properly applied to each loan scenario.

Complete underwriting is usually a combination of automated (software-generated) and human evaluation of the information submitted with an application.

6) Approval with Conditions

Conditions are must-do actions that have to be completed before full loan approval. They might include hazard or flood insurance verification, proof that funds are available for down payment and closing, sourcing certain bank deposits, and just about anything else that may be needed to satisfy those guidelines we just mentioned. Once all the conditions have been satisfied, we get a Clear-To-Close.

Week 4

7) Closing, or settlement

We all know that closing is the final step in a real estate transaction. During closing, money is exchanged for the property, documents are marked for recording with the local municipality, the mortgage and promissory note are signed, transfer taxes and fees are set up for payment, escrows are outlined for property taxes and insurance, sales commissions are paid to real estate brokers, buyers get the keys to their new house, and the transaction is completed.

Getting to the closing table on time and without unnecessary complications is actually very straightforward.

Be sure that the Loan Originator handling your buyers' financing gives them all the information they need and lets them know what to expect along the way.

Depend on me to do just that. Have them call me when they first start looking with you. Well-informed buyers make our jobs so much easier.

Let me reinforce the trust

your buyer has placed in you! sm