The Long Process of Applying For A Mortgage

Applying for a mortgage is not something that can be accomplished in a day. In fact, unless both you and your mortgage broker/loan officer are highly motivated, you probably won't even pull it off in a week. It is important to take this step before you even start shopping for a house: in today's market, agents are unlikely to work with someone who hasn't been preapproved, and sellers are unlikely to accept offers from buyers who haven't been preapproved.

To illustrate how long the process can take, I'd like to share my experience of applying for a mortgage. You'll see just how long it took. If your situation is a little more bank-friendly than mine (i.e., you're not self-employed), your process may be faster.

Saturday, July 12: Put off by the idea of phoning a large, impersonal call center to apply for a mortgage, I decided to take a Saturday morning to visit several banks and talk to someone in person. I wondered if it was a bad sign that IndyMac was on my list and they had just gone under, but I didn't want to let that stop me. I drove to a part of town with a plethora of banks. GMAC Mortgage was closed. Wachovia couldn't have been nicer, but wanted me to talk to a mortgage specialist who wasn't there on Saturday mornings. After getting the same story at Washington Mutual, I got the hint and decided to call it a day.

Wednesday, July 16: I emailed the mortgage specialist WaMu had given me. (Why didn't I do this on Monday, you say? Well, life gets in the way. It will happen to you, too.) She might be able to meet me that evening. Could I meet her at 6? No, because of my co-applicant's work schedule, but how about 6:30? The bank is closed then. She isn't available again until next Wednesday. I am not that patient, and she doesn't seem sufficiently motivated to meet with me, so she's not earning my business.

Thursday, July 17: Bite the bullet and call Countrywide's Full Spectrum Lending division, the one that gives out FHA loans, because I already know that I want a 30 year fixed-rate FHA mortgage. After about 25 minutes of providing personal information over the phone, the loan officer says he can preapprove me, barely, for the amount I want. He just needs a few pieces of paperwork and he'll send me my prequalification letter. I ask him how I turn the prequalification letter into a preapproval letter, because prequalification is useless. (Prequalification is an estimate of how much a lender thinks you might be able to borrow; preapproval is pretty close to a commitment that you will be able to actually get a loan and allows you to place an offer on a home.) First bad sign: this loan officer tells me they're the same thing. Second bad sign: I send the paperwork the next day. I don't hear from him for two weeks, and that's only because I call his manager. I decide not to go with Countrywide, and I'm guessing they decided to not really approve me after all but couldn't be bothered to tell me.

Friday, July 18: I complete a preapproval application online with Citibank. After 25 minutes of filling out my information, I find out that they just need my credit card number so they can charge me $50 to analyze my information. But don't worry, because if I do take out a loan from them, they'll refund the money. Are you kidding me? You want me to pay you to find out if you can get my business? Yeah, right. What a waste of time. And speaking of wastes of time, every single mortgage application wants the same information. It's frustrating that I can't fill out the information once and transmit it to multiple lenders. Some sites allow you to do this, but they don't really let you choose you gets your info, and I don't like that. I wanted to choose my prospective lenders.

Saturday, July 19: I go down the list of FHA-approved lenders from Fannie Mae's website. It's quite a long list. I visit all the websites of the companies whose names start with A, B, or C. I take notes. I'm only interested in the ones that provide lots of information on their websites and will let me knock out a big chunk of the application online. The only thing more annoying than providing the same information over and over again is having to spell it out over and over again over the phone. "F as in Frank, O, N as in Nancy, T as in Tom . . . ." It gets old at F.

I submit three applications. Two are with so-called up-front mortgage lenders who are supposed to disclose all of their fees when you apply and disclose them accurately. The other is with CTX Mortgage. One of the up-front lenders spits out a "preapproval" letter for me as soon as I finish the application. Hooray, I'm approved for the amount of mortgage I want. . . but the monthly payment is about 20% higher than it should be, and there's no explanation as to where that number came from. Does it include property taxes, homeowners insurance, and private mortgage insurance? What interest rate are they offering me? Why will they give me a good faith estimate of the closing costs, but not break down the mortgage payment amount? And how can I possibly be "preapproved" if they haven't analyzed my tax returns and all that other good stuff that proves my financial worthiness? So that's out.

Aimloans, one of the up-front lenders, seems to be offering a pretty good deal: their website has a chart that lets me easily pick the combination of interest rate and points that fits my financial needs. So they move to the top of my list. (As I will learn later, these numbers are meaningless, because interest rates and buydown rates fluctuate multiple times a day, and you can't lock a rate until you've got a property under contract, anyway!)

Monday, July 21: I start trying to get all the paperwork that Aimloans needs to give me a real preapproval. Tax returns, W2s, statements from every bank and brokerage account I have. This is no easy task, and scanning the things with my 3-in-1 printer takes forever.

Thursday, July 24: I've been reading a mortgage book all week. It says something about investigating mortgage companies. This didn't really occur to me before--I'm not sure why, given that I tend to research the heck out of everything. So I look up Aimloans online and find a ton of complaints about them. I decide I'm glad that I took my sweet time getting my paperwork together, block their email address, and decide not to do any business with them.

Also, at this point it's been several days and I haven't heard from CTX Mortgage, which I couldn't find any dirt on, so I send them an email.

Friday, July 25: I hear back from CTX. The woman says she never got my application. She checks with her tech support people and tracks it down. This doesn't seem like the greatest start.

Saturday, July 26: I meet my future real estate agent. He wants me to talk to his two lenders that he likes. I know all agents have people they like (or may get illegal kickbacks from). I tell him I'm not opposed to talking to his lenders, but I'm still going to shop around. He has no problem with that, which is a good sign.

Wednesday, July 30: I talk to one of my agent's lenders, who does not want to approve me for various reasons that I cannot surmount without making unacceptable sacrifices in my quality of life (i.e., forgoing self-employment and going back to work full-time for someone else in my previous line of work). This news totally ruins my day.

Thursday, July 31: CTX, on the other hand, has prequalified me for way more money than I actually want to spend and thinks I have a great shot at getting a real preapproval. I am highly skeptical based on my experiences up to this point, but I would rather keep applying for mortgages and seeing if I get a different answer than accept the alternative, which is to wait for who knows how long. Who knows if housing prices will still be affordable in my chosen area by then, or what interest rates will be? I don't want to take that risk. I also hate where I live currently. Since I started getting all the paperwork together the week before, I just have to gather a few more documents, and then wait to see what the underwriters have to say. I have a slight spark of hope, but I'm not holding my breath.

Friday, August 8: I finally get all my paperwork submitted to CTX first thing in the morning. They say I'll have a response as early as Monday evening. I know they are legally required to give me a good faith estimate (GFE) within 3 days. I'm using this as one of many tests to see if they meet their obligations properly. Depending on if I'm being generous or not, three days could either be Tuesday or Wednesday.

Wednesday, August 13: My loan officer requests more info from me. I am not really upset that I don't have a GFE yet because my situation (self-employed) doesn't fit the mortgage application mold. I'm just glad that they're working with me and that my loan officer has been in contact, keeping me updated on things.

Thursday, August 14: My loan is approved, contingent upon receiving a year-to-date profit and loss statement (PNL) for my business. I can actually put an offer on a house if I want to. But I want to review the GFE and submit the PNL first. The PNL should not change anything as they already have my income information for the year via email; they just want it formalized.

Friday, August 15: I receive my GFE. I guess I could give them a hard time about the three day thing, but that seems pointless. Overall, I am very pleased with my loan officer. Granted, she is really only doing her job, but apparently it is hard to find a loan officer who actually does their job correctly.

Friday, August 22: After discussing the GFE with various trusted advisers and asking my loan officer many questions about it, I decide that it's safe to proceed. Besides, the GFE that counts is the one the lender gives you when you've actually got a property picked out. This one is just to give you a general idea of what to expect and make sure the lender isn't already trying to pull shady tricks on you. Not that they can't do that later.

From start to finish, the process of securing a mortgage took me almost a month and a half. You'll notice that there are some gaps of several days between steps; if I didn't have a job, yes, the process could have been speeded up, but realistically, most people will be trying to balance their full-time obligations with the mortgage application process. The mortgage application process, however, can feel like a full-time job. Also, when requesting paperwork from other institutions (like W2s from former employers), you'll generally have to wait a few days to get it.

Another thing that slowed down the process is that I do not fit into the W2 mold that the mortgage industry prefers. If you do, the process will probably be a lot faster.

Regardless, I think you get the idea that applying for a mortgage and getting a meaningful preapproval that actually allows you to go out and make a serious offer on a home isn't something that can be done in a day or even a week. So if house shopping is in your future, make sure to give yourself plenty of time to secure financing.

Photo by brycej

Related Posts:
Signing Loan Documents for Our House
How I Feel About Locking My Mortgage Rate
Looking At New Real Estate Listings When You're Under Contract
Making Home Ownership Affordable
Navigating Real Estate Listing Lingo
Why You Should Use A Buyer's Agent
Understanding Closing Costs

P.S. Please ignore any political ads that are appearing on my blog over the next few days. I generally try to avoid politics on this blog. Google is putting the ads there, and unfortunately I'm too busy with work and house stuff to deal with their removal.

1 comment:

Jamie said...

Thanks for the detailed tracing through the application process. I've been going through this myself and can attest to everything you've said, including the difficulty in getting GFEs that reveal anything beyond wishful thinking. ("Good Faith" apparently has different meanings based on who is using the expression.)