Did you know that, on average, it takes 46 days to close on a mortgage? But getting to the closing table more quickly is certainly doable. And buyers who are able to close fast are favored by sellers, especially in competitive markets. So, how can you ensure a fast close?
Here are four strategies that will help you close quickly on your next mortgage:
Have Your Financial Documents Ready
Before you even begin shopping for a home, take some time to gather up important documents so they’ll be ready for lenders to verify. It’s a good idea to put together both a binder and a digital folder to organize your financial documents so you’ll have them readily available when the time comes.
Some documents that you should begin gathering up include: W-2s from current and past employers; pay stubs; bank statements; investment account statements; last two years of tax returns; profit and loss statements if you’re self employed; a divorce decree if you have one; and a gift letter if a family member is providing you money for a downpayment.
Work With a Lender First
Also, it’s a great idea to begin working with a lender before you even start looking for a home. That way, you’ll be confident in what you can afford and position yourself as a strong and serious buyer when you start making bids.
When working with a lender, you should be as candid as possible about your financial picture. You’ll need to disclose whether you’re paying alimony, have a tax lien, or even have an outstanding parking ticket you forgot about that got turned over to a collection agency. You don’t want any surprises to come up during the loan process, so it’s best to discuss any potential issues with your lender early on. That way, you can take steps to address anything that might be lowering your credit score or impacting your debt-to-income ratio and thereby your ability to get the best rate possible.
Audit Your Credit Reports
About one in five credit reports have errors on them, according to a report from the Federal Trade Commission. An excellent credit score will help you secure the best interest rates, so it’s important to monitor your reports for any potential errors that could be dragging your score down. Further, addressing any discrepancies or issues early on can ultimately help you get to the closing table more quickly.
The Fair Credit Reporting Act allows consumers to get a free credit report each year from the three major credit reporting agencies: Experian, Equifax and TransUnion. You can get instant access to these reports at www.AnnualCreditReport.com. While this credit report doesn’t have a score on it, it gives an in-depth overview of your borrowing history and your record of on-time payments.
Paying down debts and disputing potential errors are among the ways you can improve your credit before you buy your next home.
Go Beyond Pre-Qualification
Financing issues account for 37 percent of delays to the closing table. To avoid financing delays, you’ll want to go beyond the pre-qualification process, which doesn’t actually bear much weight when it comes to getting approved for a mortgage.
Instead, you want a lender to do as much underwriting as possible upfront so that you can stand out from your competition (even cash buyers!).
To expedite closing, it’s ideal to come in with a strong pre-approval. Find a lender who can underwrite your finances before you even bid on a home. Eave, for example, has a “High Certainty” program for exceptionally strong buyers where we underwrite all of your financials up front and then guarantee getting you to the closing table in 21 days, and often sooner.
Don’t Make Any Sudden Financial Changes
When you’re in the process of buying a home, and being approved for a mortgage, it’s best not to make any sudden moves that could affect your debt-to-income ratio or your credit score. Some moves that could put you at risk? Changing your job, taking out a new auto loan, or requesting a higher limit on your credit card. Making any of these changes while your mortgage is processing could jeopardize your home loan.
A final tip: Be ready and on call to answer any questions your lender may have during the home buying process and prepared to provide additional documentation.