Getting Jump on ‘Window’ in Loan Rates : Borrowers Advised to Take Steps to Accelerate Process
Consumers hoping to take advantage of the recent drop in mortgage rates can take several steps to speed the loan process and get their financing before rates go back up again.
“Borrowers who pulled back when rates went up in the fall have a new ‘window of opportunity’ to buy or refinance now that rates have gone back down,” said John Tuccillo, chief economist of the National Assn. of Realtors. “But they’ll have to act fast to keep the window from being closed on their finger tips.”
Rates on 30-year, fixed-rate mortgages have dropped to about 10 1/2% from more than 11 1/2% in late October, according to CompuFund, a Pleasanton-based computerized mortgage network. The lower rate translates into a monthly savings of about $60 on a $100,000 loan.
Of course, no one knows for sure if rates will continue moving downward, or if and when they’ll start moving up again. But many economists believe rates will stay about the same or decline slightly over the next several weeks and resume their upward march early next year.
Locking in the Rate
The best protection against rising rates is to select a lender willing to “lock in” a specific rate at the time the completed loan application is received. Some lenders will lock in a rate for just a few weeks, while others will guarantee it for 60 days. Still others refuse to offer any sort of lock-in commitment, or will do so only for an additional fee.
Borrowers who find a good loan and a lender willing to lock in the rate should pay particular attention to when the lock-in clause takes effect. Ideally, it will be effective the moment the lender receives a completed application because the rate will be guaranteed regardless of how long the lender takes to process the loan.
A less-meaningful commitment is one that begins only after the application has been received and the loan has been processed. If rates move upward while the lender is still processing the paper work, the eventual lock-in will reflect the higher rates.
Of course, borrowers should also insist that any promise to deliver a loan at a specific rate should be given in writing. The verbal promise of a loan officer or mortgage broker is nearly impossible to enforce.
Several lenders and mortgage brokers are also willing to “pre-qualify” would-be home buyers before they select their dream house--a process that allows the borrower’s escrow to close quickly once a home is found.
“We can process all the borrower’s paper work first and approve him for the highest loan amount possible,” said Ira Cohen, senior vice president of Canoga Park-based ARCS Mortgage Inc. “When the buyer finds the house he wants, about the only thing we’ll need is an appraisal--and that can take only a week or so.”
As an added bonus, Cohen said, borrowers who go through the pre-qualifying process find out the maximum loan they can get. That makes shopping for a new home easier because the buyers don’t waste time looking at properties they can’t afford.
Consumers who want to buy a new home or refinance their existing one can take several other steps to expedite the loan process.
One of the simplest moves is to gather up all the financial documents they’ll need to qualify for the loan and have them in hand when they first visit a mortgage broker or loan officer. Some lenders require copies of income-tax statements, pay stubs, W-2 forms and a host of other documents; others require much less.
Have Records Available
“Find out exactly what the loan officer will need to see before he can make the loan, and have all the necessary documents ready to go,” said Rick McGill, residential lending manager for San Diego-based Great American First Savings Bank. “You’ll run into delays if you can’t find all the records you need.”
Consumers should also have a list of all their bank accounts and credit cards, the account numbers and their approximate balance. Mailing addresses for savings institutions and creditors should also be handy.
Most lenders also want the borrower to submit a list of names and addresses of all employers over the past two years.
The loan application itself should be filled out as precisely as possible. “Most borrowers fill out their applications honestly, but they don’t always do it accurately,” said Sig Anderman, president of CompuFund.
Clarify Information
As an example, consider a borrower who states on his credit application that he earned $50,000 last year when his actual salary was $40,000 and he made another $10,000 from investments. The lender will likely need to clarify the information--a process that could take several additional days, especially if it involves more paper work.
A borrower who lists rental property as an asset on the application will likely be asked for mortgage-related information about the property and may also be asked to submit rental income statements or receipts for the last 12 months. The lender might refuse to make the new loan if the rental property is vacant.
Borrowers can also speed the loan process simply by hand-delivering necessary paper work instead of mailing it. With the holidays here and post offices swamped, personal delivery can be especially important.
“Walking the documents over to the loan officer might not change your folder’s place in his file drawer, but it’ll definitely save time,” Anderman said.
Although the lender will likely select an appraiser to estimate the home’s value, the borrower should make sure the appraiser knows whom to contact to gain access to the house.
Credit Reports
“It’s amazing how often loans are held up for a week or two just because the appraiser can’t get the telephone number of the person who’s supposed to let him into the house,” said McGill at Great American.
Credit reports will also be ordered by the lender, and can usually be received in a matter of hours. Although delays in getting the report are unlikely, borrowers who have minor blemishes on their credit record--such as a missed payment on a charge account because the check got lost in the mail--should act quickly to clear the matter up.
A letter of explanation should be written to the merchant or bank and, if possible, a copy should be sent to the credit-reporting agency used by the company.
Remain Patient
If the lender intends to verify salary information by contacting the borrower’s employer, the borrower should tell the personnel department to be on the lookout for the verification statement and ask the department to respond to the request immediately, Anderman said.
Borrowers should remain patient for a few days if processing the loan takes longer than the loan officer estimated. But if the delay lasts for more than a few days, the problem should be discussed with the officer and--if it isn’t resolved--taken up with his supervisor.
If rates go up and the delay wasn’t the consumer’s fault, some lenders will offer the lower rate that was available when the loan was originally expected to close. It’s good customer relations and avoids hassles with unhappy borrowers.
