Are mortgage commitment dates important? YES…
Mortgage Commitment dates are very important for several reasons. I wrote about this below... please read -
The problem that I am seeing now more and more? I am seeing unreasonable commitment dates in the agreement of sale. I am not the only one that has noticed this because I have asked a few loan officers that I respect and they have agreed.
We all know that realtors, buyers, sellers, and lawyers get upset when commitment dates are missed. Just recently, I had 2 different transactions that had unrealistic commitment dates in my opinion.
Here are two examples of what I think are unrealistic commitment dates.
Buyer # 1
Contract signed 3/31/10 - Mortgage Commitment date 4/16/10 - Closing date 4/28/10
Buyer # 2
Contract started and signed by buyers on March 11th - seller’s signed March 17th - When the contract was drawn up, the commitment date was set for 4/2/10 with a settlement date 4/30/10. Because of the delay with the seller accepting the agreement of sale, the commitment date was never extended.
So, why were these commitment dates unrealistic?
It's called a time line. There are certain things that need to take place in order to give a good and accurate mortgage commitment letter. Sure, many lenders and loan officers can give conditional commitment letters. And I am talking about such letters that have conditions out the ying yang. Almost like it was never underwritten.
What needs to be done to perform a good commitment letter in order to meet that commitment date?
1. An acceptable appraisal - Many of us don't order an appraisal until we know that we have a fully executed contract. Now, an appraisal has to be ordered, a date and time set to inspect the home, and then that appraiser getting the appraisal back to the lender in a timely manner. It could take 2 days to order the appraisal, 3 days until the appraiser gets out to the property, and 3 more days until the appraiser gets it back to the lender. Just right there is 8 days. And in some cases, this could be a quick turn-around time. Keep in mind, it also depends on the type of loan, if one is dealing with the HVCC, or just the fact that the appraiser is having a hard time contacting the listing agent. Overall, it could be a solid 10 business days until a lender sees an appraisal and this would not include weekends. So if my numbers are correct, this is 13 days, almost 2 weeks.
2. Time of mortgage application - In regards to my example number 1 above? The borrower couldn't meet with me and get me their appropriate information until April 5th. That means I have roughly 11 more days, 9 of them which are business days, to get a commitment letter out in time.
3. Difficult loans - Each and every borrower is different from the next. I keep hearing some realtors say that x,y,z lender got such and such borrower done very quickly. All I can say is that each and every buyer is different from the next. Some loans are easy and some are difficult. In many cases, once we start to dig deeper into that borrower, we need more information. A good example are self-employed borrowers. Sometimes we need more proof for write-offs to justify more income, etc, etc.
4. Underwriting Time - Each lender is different and each time period can be different if real estate is busy or slow. It's safe to say that it should take 5 business days for a loan to be in underwriting, But this time needs to be factor into the whole equation.
Overall, as you can see, there can be many reasons why it could take more than 2 weeks to get a realistic commitment letter to meet the commitment date. If you take my #2 and # 4, subtract the underwriting days, it says that I have 4 realistic days to process a loan. And this is just not enough time. And what about the appraisal? What good is a commitment letter if it is subject to an acceptable appraisal? So.....
Team Work & Communication
So how can a realtor help in achieving the commitment date? They should be calling up the loan officer to get a better feel for that client. To find out such things as their current underwriting time. Is the borrower complicated? Meaning, do I have everything that I need to properly process and underwrite the deal. ... and so much more.
Overall... keep in mind everyone, that each borrower is different from the next. That we see too much misleading advertising for 10 day closings from certain lenders. (read the fine print to see how this has to happen) And lastly, that we all need to work together. Don't hesitate to ask and not assume.
Food for thought… A 30 day closing in my opinion is very realistic, but a commitment letter due in 14 days is not. Weekends and appraisal times need to be considered.
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