I think one thing that causes a lot of problems in life is our perception of time. We all seem to think we have plenty of time to do things. But what we are really doing is justifying our procrastination. We think we have plenty of time to get around to working on our tax filing, the yard work, paying bills, departing to meet friends for dinner, or sending in the paperwork for our loan application. Do we? No. Then what happens? We get an extension to file our taxes, we mow the yard when the grass is way too long, the bills get paid late, we always show up late for dinner, and the settlement for our new home or refinance gets delayed.
Always late to dinner?
I am of course more focused on making sure the loan process does not get delayed. I am not as worried about getting to dinner on time. Although to be fair to the people waiting for me at dinner I should remember to keep in mind the time it takes to walk to my car where its parked, the drive time, traffic, parking my car, and walking to the restaurant. But we often forget all those steps. We only think, “It takes 15 minutes to get to the restaurant from my office, so I’ll leave at 6:45 PM for a 7 PM dinner reservation.” What about all the other steps? If you leave at 6:45 PM, your friends will be left waiting for you for sure.
The mortgage process
For the same reasons, it is really very difficult to manage a mortgage transaction because of all the steps and people’s misperception of time. If you are buying a home, you have made a contractual agreement and given an earnest money deposit to meet certain deadlines. It is urgent that every single requirement be tended to immediately.
But when you have a deadline like closing a mortgage that is typically at least 30 days away, everyone seems to think that is an enormous amount of time. It feels like each task can wait because there is no way that small delay will create a problem on a 1 month deadline, right? That assumption is dead wrong. And once you miss the very first deadline, you have immediately put the transaction under major pressure. A loan process is like a game of dominos. If you are slow to knock over one domino early on, then all the other dominos that are supposed to fall are stalled.
Below is only a partial list of things needed from the borrower in order to not delay a lender:
- The borrower needs to complete a loan application on day #1, not day #2 or later.
- The borrower should also review, sign and return loan disclosures on day #1. Don’t delay until the home inspection “just in case the deal does not move forward due to problems on the home inspection.” The lender needs the loan disclosures signed day #1 to order the 4506 form and appraisal. Without the loan disclosures all these items and the entire loan process is stalled.
- Borrower should submit all necessary supporting documents on day #1. Even submit prior to writing a sales contract to avoid the day #1 crush of paperwork.
- If the borrower is using a 401(k) loan the borrower needs to start the paperwork ASAP. Don’t wait until later just because they say the process only takes 10 days.
- Borrowers must send in all pages of a bank statement.
- Borrowers must send in all pages of a tax return, not just the first page.
So do yourself a favor when you apply for a mortgage give it the attention and seriousness it deserves. Make it a priority, be thorough, and do everything required of you immediately when asked. Otherwise, the lender may deliver the bad news to you, the seller and the realtors that settlement won’t happen on time. And you won’t have any room to complain.