Las Vegas Mortgage Approval and Funding Process
Purchasing a new Las Vegas property can be an overwhelming process between the various contract negotiations, mortgage approvals, inspections, and new appraisal guidelines.
The following outline will help buyers with the overall time line:
1. Loan Application –
The loan application should be one of the first places home buyers start, especially if you are planning to apply for an FHA mortgage.
This is where the loan officer can spend a little time with a potential borrower to discuss their unique lending scenario, financing goals, and qualifying guidelines.
Depending on the amount of information requested by both parties, a typical loan application generally can take between 15 minutes to an hour.
It is highly beneficial to get all of the required documentation submitted at this time as well so that any potential underwriting challenges can be addressed.
2. Pre-Approval Letter –
A pre-approval lets the borrower and seller know how much they can qualify for, and is issued once the loan officer has verified income, assets, and credit.
As lending guidelines continue to change, most loan officers will take the pre-approval a step further and run a full online Fannie Mae (DU) or Freddie Mac (LP) automated underwriting approval to make sure the borrower has an additional layer of confidence prior to shopping for a new home.
Most sellers are requiring a full approval be submitted with a purchase offer.
Keep in mind, DU or LP approvals are not considered full underwritten approvals, unless an underwriter has physically analyzed the submitted documentation. Every bank has their own quality control systems for this process, but the average time it should take for a full underwritten approval is 48-72 hours.
So basically, it is a good idea to get everything in and wait an extra day or so for an underwriter to issue a full approval.
3. Loan Search / Good Faith Estimate –
Once a pre-approval has been issued, it is important that the lender and borrower agree on the actual terms of the new mortgage prior to submitting offers on a new property.
A Good Faith Estimate is a form that outlines the interest rate, down payment, purchase price / loan amount, and other estimated closing costs so that the borrower can make an educated decision.
Even though the GFE is an “Estimate” based on the disclosed costs of the new loan, there are several things that the loan officer does not have control over. Make sure you ask your loan officer what specific line items you can expect to be consistent or change at the time of closing.
4. Purchase Offer –
Depending on which market you are in, the purchase offer and acceptance process can be an entirely new beast to deal with.
Short Sales, Bank Owned (REO), and Rehab properties may take several weeks of negotiation before a perceived win / win deal is reached. It is important to hire a full-time real estate professional who is familiar with the landscape and knows how to navigate these types of transactions.
Recent neighborhood sales, pending foreclosures, and the actual terms of the purchase agreement are a few things that you need to pay close attention to before you commit to putting a sizable earnest money deposit down.
4. Due Diligence Period –
This is the time, as defined in the purchase agreement, that the borrower and seller have to complete all inspections, appraisal, review HOA / title documents, and anything else that may have an impact on the successful closing of the purchase transaction.
Due to new HVCC and FHA Appraisal guidelines, it may take a few extra weeks before an appraisal can be delivered.
5. Appraisals / Inspections Completed –
Typically, the appraisal and home inspection are paid for in advance by the borrower and have to be completed within 10 days of an accepted offer. Obviously, an extended period of time will have to be given if the mortgage falls under HVCC guidelines.
The mortgage company will have to order the appraisal through a third party Appraisal Management Company, but the buyer’s agent generally handles the logistics of the property inspection.
Most borrowers like to be present at the time of the home inspection, however, the appraisal is handled privately by an appraiser.
6. Final Conditions Submitted to Bank –
The appraisal, preliminary title report, and any addition borrower documents are submitted to an underwriter for final approval. This process takes 48-72 hours and is the final step, other than a loan lock, needed to order closing documents.
Proof of hazard insurance is also required prior to ordering loan documents.
Some mortgage programs allow a borrower the option of including their quarterly real estate tax payments and annual hazard insurance premium in the monthly mortgage payment by establishing a separate escrow (impound) account.
Make sure that you know what your total monthly mortgage payment is before ordering documents.
7. Loan Lock –
Mortgage rates have a tendency to change a few times a day depending on market conditions and adjusting credit / bank guidelines. It is important to regularly communicate with your loan officer to make sure you get the rate and closing cost scenario that you have budgeted for.
Some brokers have the ability to change banks or negotiate a lower rate if things change for the better, but you are ultimately putting full trust in your loan officer when it comes to the rate game.
Rates can be locked between 7 – 90 days. A good rule of thumb, the shorter the lock period, the lower the interest rate.
Since a .125% adjustment in rate may only impact your monthly payment by a few dollars, it is a good idea to find a rate you are comfortable with and lock as soon as possible.
With the rapid fluctuations in pricing due to the turbulence on Wall Street, rates could move .5% in a matter of hours causing monthly payments and closing costs to significantly change.
8. Final Loan Documents Signed –
The final loan documents are delivered to an escrow or title company for preparation. The borrowers will either sign with an escrow officer or meet an approved notary at a convenient location.
Sinings can take between 1-2 hours, depending on the amount of questions the borrower has about the transaction.
If there is additional funds to close, like a down payment or closing costs not covered by the seller, the borrower will bring a certified check to the escrow company.
*Make sure your loan officer knows where these funds are coming from so that there is a documented paper trail for the underwriter to approve.
The final property inspection is also completed during this time. If there are things that still need to be fixed before the you agree to close on the purchase, let your loan officer know if you want to hold off on funding, unless the rate or documents are set to expire.
9. Funding / Recording-
Once the final documents have been signed by the borrowers they are shipped back to the bank for a quick inspection and then set in line for funding.
A wire is sent from the lender through a few places and eventually ends up at the escrow company.
Since this process may take a few hours, it is common to hear about a delay between the time a bank “Funds” a loan and an escrow company “Records” a closing.