NEW YORK (MainStreet) – The clock is ticking for home shoppers: On Oct. 1, the limit for federally backed mortgages will drop from $729,750 to $625,500, giving borrowers between those limits a strong incentive to close the deal by the end of September or face a regular mortgage with higher rates and fees.
Even if you’re not in that special category, you may want to close your deal unusually fast anyway. Many homebuyers want to move by the start of school, before a new job begins, or to avoid the costs and hassles of having to move out of one home before the next one is ready.
The shorter the deadline, the harder it is to guarantee a closing on time, but a number of steps can improve the odds.
Whatever the reason for the rush, the borrower should begin thinking about the issue from the very start of home shopping. As soon as you decide to look for a new home, check your credit history and correct any errors, to avoid delays from having to clear up questions after the loan process begins.
Use the BankingMyWay Maximum Mortgage Calculator to make sure you can qualify for the loan you’ll need. Remember that even if you do appear to qualify, the odds of approval are better when the monthly payment takes a smaller portion of your income.
A bigger down payment reduces the monthly payment, making it easier to qualify. That can provide a margin for error in case you end up with a loan rate higher than you’d expected.
In shopping for a mortgage, look for lenders with the best rates, then ask their loan officers how fast a loan can be approved. Also make sure your credit score really qualifies you for the rate you’ve been quoted. Ask about other factors that could influence the approval, like a dependence on self-employment income.
Get a list from your lender and agent of all the documents you will need for your application. Also prepare documents that may be requested later: tax returns, divorce papers, cancelled checks for mortgage or rent payments, updated statements for financial accounts, letters stating that any gifts you are using for the purchase are not loans that have to be repaid.
In your application, avoid the temptation to make your financial situation look better than it really is. The lender is sure to find out if your income jumped because of a commission or bonus you cannot count on in the future.
Your closing date should be stated in the purchase contract with the seller, with wording to assure you will not be penalized if the loan doesn’t come through in time. Make sure the seller will help out by providing access to the home inspector, appraiser and anyone else who will need to get in. Your real estate agent should have access to a key.
In most states, the buyer orders the title search. Even if the title fee is set by law, it can pay to shop around for a firm that will guarantee the process can be finished on time. Your real estate agent and lending officer may have recommendations, but because they may try to throw the business to friends it’s worth it to shop around on your own as well.
As the process begins, set up dependable, fast communications with all parties involved. You don’t want to lose a day responding to a document request because the bank left a message on your home phone instead of calling your cellphone. Continually touch base with all parties to make sure everything’s flowing on schedule. Be prepared to hand-deliver documents rather than rely on the mail.
Finally, be ready for curve balls. Because there is often a scramble for documents in the days before closing, think about taking vacation time or alerting the boss you may need to dash out unexpectedly to close the deal.
Are you planning a move? Check out MainStreet's look at why buying is cheaper than renting in most U.S. cities and get working on your loan application!