So, you’ve successfully found a home you like, negotiated a sweet deal on it and you’re fast trackin’ it to the closing table! You are simply waiting for the lender to come out of their huddle to confirm your financial ability to pay back a 30 year loan and give you a thumbs up to complete the purchase of your home.
The contract states that you’ll close on or before this coming Friday. The title company is poised to host your closing and commemorate the event with a stack of docs that is nearly as tall as the Sears Tower. The agents are excited to be, you know, actually closing a transaction and the lender is…
Taking their sweet time…
Ok, so it’s not really the lender. Not the nice person who took all your financial information and showed you the good faith estimate on a home that costs this much. Rather, the process known as “underwriting” is responsible for fouling up this wonderful occasion…
Underwriting: The New Black Box
…or as close to magic as we see in real life.
Really, from an agent’s perspective, it is extremely frustrating to have shepherded a negotiated deal to the point of simply waiting…and waiting…and waiting… for the lender to bless the mortgage. From a client’s perspective, it is flat out ridiculous.
What, do you need a pint of blood? You want my first born too? Shall I pee in a cup too, just in case your ‘underwriter’ decides to run a drug screen while they’re at it?
Lest you think I am exaggerating, I’ve had clients actually say these things. Out loud. To me. Literally.
When an agent or a lender tells me that the loan is in underwriting, I feel like going to a corner in my office and slowly rocking back and forth, mumbling, “It’ll be alright. It’ll be alright.”
Just a few short years ago, hearing those words, “It’s in underwriting,” meant that we were a few days from “done.” Now, it means that we’re about to enter…real estate’s waiting room.
But Doc, I’ve Been Here for an Hour
The seemingly endless requests by the underwriter for verifications and assurances at the eleventh hour are enough to drive real estate consumers to the bottle.
I grasp that by being too loose with lending guidelines we ended up in this debacle. I get that. I truly do. Now that the pendulum has swung the other way (and boy, has it ever!), we are being told that the combination of jobs and housing will be what pull us through this economic downturn.
If real estate consumers are to help bring the economy back to life by buying and selling homes, don’t you think that some of the flaming hoops thrown up by underwriters ought to be addressed? When the initial pre-approval is completed, buyers bring in all the information their lender requires. This includes items such as, but not limited to: previous years’ tax returns, verification of employment, W-2 forms, utility bills, rental bills, 401k statements, etc.
All of this information is collected up front. That’s the typical process. So, why does the underwriter ask for all this information….again? And seemingly at the 11th hour? I realize that circumstances can change from when the pre-approval was provided to when an offer is finalized, but when the underwriter asks, for the third time, for a verification of employment, it begins to feel as though they are searching hard for a reason NOT to fund the mortgage.
And what you may not know is that this sort of stuff happens ALL THE TIME. Seriously. It’s become almost the norm.
This Plastic Chair is COMFY!
So, by nature, I am a “find the silver lining” kind of guy. The thin silver lining that I glean from this situation is two-fold:
- It doesn’t appear we are going to readily repeat the mistakes of the past housing market; and
- Property is still transferring from one owner to the next.
The process simply takes a LOT more patience than usual.
As a seller waiting for the loan to come out of underwriting, be as patient as you can, stick to the letter of your contract and insist that your agent speak with the lender to ensure that they and you understand exactly where things stand.
As a buyer, bring a big bag of patience too. Also, understand and empathize with the stress that sellers are feeling in this market. Property values are declining, there is uncertainty in even selling their home, etc. Make every effort to reinforce your intentions. Respond ASAP to the underwriter’s requests. Honor your obligations at every turn.
If you’re a bank, consider hiring additional, well-trained folks for the underwriting process and task them with meeting the deadlines written into the purchase agreements. Most agents aren’t so oblivious as to believe a deal can close in two weeks anymore. But the first bank that comes up with that quick turnaround capability in my market place will start to see a LOT of business from flustered consumers…