If Your Home Doesn’t Appraise For Your Offer Amount
When you make an offer on a home, you’re telling the seller the amount that you’re willing to pay. However, what the lender is actually willing to lend to you might be a completely different number, especially if there’s an appraisal gap .
Two things can happen with an appraisal gap. The best-case scenario happens if the home appraises for more than your accepted offer. In that case, the lender generally has no problem lending you the requested amount, and you get instant equity in the home.
But often, the home will appraise for less than your accepted offer. In that case, you’ll either need to pay the difference in cash from your own savings, negotiate a lower price with the seller, or walk away from the deal.
Your Interest Rate Lock Expires
If your interest rate lock expires before your loan closes, and if market conditions have changed such that your new rate or closing costs will be higher, the worst-case scenario is that youll no longer qualify for your mortgage. If you still qualify but your annual percentage rate will change by more than one-eighth of a percent and the lender has already issued your closing disclosure, the clock will restart on the three-day waiting period before you can finalize your loan.
How To Keep Your Closing Timeline On Track
Closing a home loan requires coordinated efforts from many people, and the only person whose speed you can control is your own. So any time the ball is in your court, return it as quickly as possible. Underwriter needs a bank statement? Pull it from your online account and send it over ASAP. Appraiser needs to reschedule? Get yourself rebooked before their other cancellations beat you to it.
Here are some more specific tips for closing on schedule:
Before taking that last step, discuss the situation with your real estate agent and have them discuss the situation with the seller if you dont want your purchase to fall through. Youll need to negotiate a new closing date and you may have to compensate the seller for the inconvenience. If theyre not willing to work with you, you may lose your earnest money deposit, making the savings from changing lenders a wash.
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Understanding Federal Housing Administration Loans
In 2021, you can borrow up to 96.5% of the value of a home with an FHA loan. This means you’ll need to make a down payment of just 3.5%. You’ll need a credit score of at least 580 to qualify. If your credit score falls between 500 and 579, you can still get an FHA loan as long as you can make a 10% down payment. With FHA loans, your down payment can come from savings, a financial gift from a family member, or a grant for down-payment assistance.
It’s important to note that with an FHA loan, the FHA doesn’t actually lend you money for a mortgage. Instead, you get a loan from an FHA-approved lendera bank or another financial institution. However, the FHA guarantees the loan. Some people refer to it as an FHA-insured loan, for that reason.
In order to secure the guarantee of the FHA, borrowers who qualify for an FHA loan are also required to purchase mortgage insurance, and premium payments are made to FHA. Your lender bears less risk because the FHA will pay a claim to the lender if you default on the loan.
Though FHA loans require lower down payments and credit scores than conventional loans, they do carry other stringent requirements.
|For How Long You Pay the Annual Mortgage Insurance Premium|
Is an FHA Mortgage Still a Bargain?
How Can I Speed Up The Closing Process
The best way for you to speed up the closing process is by providing exactly what your lender asks for, as quickly as possible. If your lender needs every single page of your bank statements, including the blank ones, send them every single page of your bank statements. Oftentimes the documentation requirements for a mortgage seem tedious, but cooperating as quickly as possible is the single greatest thing you can do to speed up your closing process.
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How Long Does It Take An Fha Loan To Close
We receive a lot of FHA-related questions by email that start with the words how long. How long does it take to get approved for an FHA loan? How long do they take to close? And so on. So I thought it might be helpful to compile a few of those FAQs onto one page.
Briefly: There are many variables that can determine how long it takes to close on an FHA loan. Underwriting is one of the biggest variables. Once youve found a home and signed a contract with the seller, the rest of the lending process might take two or three weeks on the short end, or two to three months on the long end. There are many variables and several different people involved. So the total processing time can vary.
Project Review And Underwrite The Loan
Your loan will be submitted for a construction project review and to our underwriting department to approve the permanent portion of the loan. In underwriting, a financial institution takes on financial risk as part of a larger transaction.
GO Mortgage underwrites the construction process. This means in the event the borrower cant meet obligations or the builder does not perform as expected, we can take action.
The credit package for the long-term financing of the home must also be underwritten. With our underwriting services, you save time and money compared to conventional loan origination. For example, you do not need a 20% down payment or pricey mortgage insurance.
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How To Get Pre
While getting pre-approved for an FHA loan is an optional step, it is highly recommended. Pre-approval refers to the process when a lender reviews your financial situation to decide whether you are eligible for an FHA loan and how much they can lend you. This process is known as pre-approval because it occurs before house hunting and is not official approval for the final loan.
If you get pre-approved for an FHA loan, you can prove a mortgage lender has screened you, and you can share this pre-approval letter with sellers when you make an offer on a home. A seller will be more likely to accept your offer when you have a pre-approval letter. After you are pre-approved, you can begin shopping for a property in your price range.
Available Single Close Construction Loan Programs
When you choose one of these government-backed home loan products, it means that your lender must follow specific rules in what fees can be charged, what interest rates are allowed, and how the funds can be used. This helps protect buyers from unfavorable loan practices.
Remember, these loans are issued by an approved lender, not directly by the government.
Many federally-backed loan programs enable buyers to move forward on their home purchase with low or no down payment. Buyers who have poor credit are also protected as long as their current financial situation allows them to meet their mortgage obligations.
Naturally, all of our available loan programs can be used to finance new home construction. We also work with buyers to help them finance land when they do not already have a lot to build on.
Some of our most popular loans include:
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How Long Does It Take For An Fha Loan To Close
Lindsay VanSomeren is a credit card, banking, and credit expert whose articles provide readers with in-depth research and actionable takeaways that can help consumers make sound decisions about financial products. Her work has appeared on prominent financial sites such as Forbes Advisor and Northwestern Mutual.
FHA loans have a lot of advantages, especially for first-time homebuyers, as you don’t need as good of a credit score, or as much money saved up. However, they do have some hoops to jump through, and if you get an offer accepted, you might be wondering how long it takes to close on an FHA loan.
Generally, it takes about two months to close on an FHA loan. According to August 2021 data, for example, it takes an average of 51 days to close on an FHA loan, compared to just two weeks if you were to pay in cash. Learn more about why you still might want to choose an FHA loan and how the different requirements affect the time it takes to close on a loan
What Documents Do I Need To Apply For An Fha Loan
When you initially apply for an FHA loan, lenders will ask about your income, savings, debts, and assets.
Once you decide to move forward with the loan, theyll need proof of the information you provided. That means submitting a variety of financial documents.
Borrowers are typically asked to provide:
- Tax returns from the past two years
- W2s from the past two years
- Bank statements from the previous 60 days
- Financial statements for other assets
- Recent paycheck stubs
- Proof of other income such as Social Security or disability income
- Name and address of your employers over the previous two years
- Yeartodate Profit and Loss statement, if youre selfemployed
The lender will also pull your credit score and credit reports. Authorizing a credit check allows the lender to view your credit history and verify your current debt load and minimum monthly payments.
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How Long To Close On A House
|Steps to closing on a house||Estimated time|
Be ready to submit your earnest money deposit via check or bank transfer within three days of signing a purchase agreement. In a competitive real estate market with multiple bids above asking price, things can move very quickly. In other words, youll want to lock down the agreement as soon as possible.
Once you have an accepted offer and signed the purchase agreement, your lender can order a title search and you can schedule a home inspection. If the home inspection report reveals that certain home repairs are needed, negotiate with the seller to get those taken care prior to closing, or see if the seller will lower the purchase price so you can handle the repairs yourself later on.
Advantages Of Closing Quickly
You may want to close quickly in order to save a great deal of stress and hassle and to potentially lower your moving costs.
Another key reason to speed through your closing is that you can avoid extension fees for your mortgage rate lock. Mortgage rate locks allow you to secure your mortgage rate, so you dont have to worry about rates rising as you finish the closing process. However, if you exceed the term of the lock, you may have to pay your lender a percentage fee.
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What Factors Affect The Time To Close
So now that you know its not the FHA that controls the time to close. Lets look at what does affect it.
Application completion is a big factor. No lender can underwrite a loan with an incomplete application. If the lender has to go back and forth with you, it can delay the process. In fact, your process isnt considered started until you complete that application. So dont start the time clock until you have that application looking good.
The lenders current workload plays a big role too. Applying for an FHA loan during a time when a lot of others are too, creates a longer wait. Some lenders work quick despite a larger workload, while others slow down. It pays to ask a lender what their current workload is like so you have an idea of what to expect.
The appraiser can hold things up too, though. Again, a large workload can make it harder for him to get out to the property. It can also slow down the turnaround time of the appraisal report. Underwriters cant move forward with the underwriting process until they know the value and condition of the home.
Lastly, you can affect the time to close. Its not often that borrowers have everything an underwriter needs at once. Of course, supplying paystubs for the last 30 working days, last 2 years W-2s, and your asset statements for the last 12 months helps speed things along. But, many lenders require further verification. You wont know what they need until they ask. Then its up to you to act fast.
What Do I Need To Qualify For A Conventional Loan
You will need to complete a mortgage loan application and, along with paying applicable fees, have a credit report run that examines your credit history and provides a credit score, and also provide supporting documentation.
Such documentation can include:
- Proof of income such as pay stubs, two years of federal tax returns, two years of W-2 statements, etc.
- Asset accounting of bank statements and investments to establish that you can pay the down payment and closing costs.
- Employment verification demonstrating you have a stable work history to encourage lenders to work with you.
- Miscellaneous documents including your drivers license or state identification card and your Social Security number
Conventional loans give the borrower more flexibility when it comes to loan amounts while an FHA loan caps out at $331,760 for a single family unit in most lower cost areas and $765,500 in most high cost areas. Conventional loans often do not come with the amount of provisions that FHA loans do. They also do not require mortgage insurance if the loan to value is less than 80%: in other words, if the borrower can make a down payment of 20%.
Because Kate has saved enough to put 20% down, this loan will be a better option because she will not have to pay for mortgage insurance. In addition, if the property you are buying is more of a fixer-upper, a conventional loan or FHA 203k loans could be an option.
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The Federal Housing Administration
FHA is not a mortgage lender.
- The U.S. Department of Housing and Urban Development is the parent of the Federal Housing Administration
- FHA insures and guarantees FHA Loans to banks and private lenders in the event borrowers default on their FHA Loans and go into foreclosure
- HUD will insure lenders against losses due to the default on FHA borrowers
- Due to FHAs guarantee and insurance, many lenders are able to originate mortgage loans with 3.5% down payment and low mortgage interest rates
- Due to FHA Guarantee, lenders are able to offer low down payments
- Also due to the guarantee, lenders can originate mortgage loans for borrowers with prior bad credit
- Mortgage lenders need to adhere to the FHA mortgage lending guidelines
- All lenders must make sure that every FHA mortgage loan application meets the guidelines set by FHA in order for FHA to be able to insure them
- Many home sellers refuse to sell a property to an FHA approved home buyer
- This because they feel that FHA loans are much tougher than conventional mortgage loans especially when it comes to appraisals
- This is not the case
- A home buyer who is FHA approved needs to get an FHA appraisal done on the subject property
- Conventional home buyers need to get a conventional appraisal done
The only difference between an FHA appraisal and a Conventional appraisal is that safety and security are stressed with an FHA appraisal.
Documents Reviewed By Mortgage Underwriter Prior To Ctc
All mortgage documents are scrubbed by the mortgage processor before it is submitted to the mortgage underwriter. Any incomplete mortgage docs will be kicked back to the mortgage processor by the underwriter. Incomplete mortgage docs are one of the main reasons for delays in the mortgage process.
The following documents will be thoroughly reviewed by the mortgage underwriter prior to issuance of a CTC:
- Paycheck stubs
- The final verification of employment has been confirmed.
- Some mortgage lenders have a quality control department that every mortgage application needs to go through prior to a clear to close can be issued.
- The quality control department has a quality control mortgage loan underwriter who will review the original mortgage underwriters work
- This is done to make sure there are no mistakes made and that the mortgage loan can be sold on the secondary market to Fannie Mae or Freddie Mac
- Once a clear to close has been issued, the mortgage lender prepares docs
- A clear to close means that funds can get wired once final figures are approved
- With a CTC, the mortgage loan can close
- All docs need to be complete, verified, and make sure that is insurable on government loans
- Conventional Loans are double-checked to make sure that the lender can sell it to the secondary market and need to meet Fannie and/or Freddie Mortgage Guidelines
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Do You Need A Down Payment For A Single Close Construction Loan
Whether you need a down payment for your loan depends on the specific loan program you decide to use. In a traditional construction loan, most buyers need a down payment around 20% to access the most favorable one-time close loan terms.
Our one-time close programs offer down payments anywhere from 0% to 3.5%, to a maximum of 5%, a small fraction of what other lenders typically ask for.
Sign And Pay Closing Costs And Fees
The last step of the FHA loan closing timeline is to sign your loan documents and pay the fees and closing costs. You will likely receive your official loan estimate soon after you finish applying for your loan. Closing costs tend to include:
- Loan processing costs
- Title insurance and searches
Closing costs are typically a small percentage of your total loan amount. The FHA allows home builders and sellers to pay a portion of your closing costs. Your lender can also roll your closing costs into your loan, though this may mean you need to pay a higher interest rate. Additionally, some closing costs may be negotiable.
In some cases, you may also be eligible for assistance with a down payment or closing costs. FHA loans can be paired with local and state mortgage programs to help you pay some of these upfront costs. Many programs are intended to help lower-income homebuyers and first-time homebuyers.
At this stage of the FHA home loan process, you will also receive your financing. Property ownership will transfer to you from the seller, and you will receive the keys to your home.
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