With interest rates hovering at historic lows, mortgage brokers, lenders, and bankers are busier than ever as real estate owners rush to refinance and first time buyers flood the housing market to take advantage of the long-term cost savings associated with reduced rates. This is all happening, however, on the heels of a global pandemic which spiraled into a national emergency, making lenders wary about the repayment ability of borrowers, thereby making borrowers seemingly jump through hoops to secure a loan. Additionally, so many lending offices are now remote or disconnected, further slowing and complicating loan processing and communication with borrowers.
Anyone who has ever gone through the mortgage process knows that it is not easy, and the time spent on document gathering is taxing. That said, in the last several years, and even more so in the past several months, the process has become more grueling as lenders struggle to keep up with the extreme volume, oftentimes resulting in employing new hires who may not have the experience of senior representatives. These practices are certainly trying their best to keep up, however if you are beginning the refinancing or home purchasing process, it will behoove you to start on this new venture with a few key expectations:
- You will work with several representatives: while you may feel constantly “handed off”, there is a reason for the loan to go through so many hands and stages, mostly for your security and to follow compliance regulations. If you find a great lender, however, rest assured that you will have a point person to turn to throughout the process for clarification of terms, status/progress, and calculations.
- You will need to do a lot of legwork: Lenders request several renditions of bank and investment account statements, pay stubs and proof of earnings, tax returns, and proof of identification. Be prepared to provide updated or duplicate documents throughout the process.
- The process may take a several weeks or several months, and likely the latter: With more red tape to cross than ever, expect a lengthy and bumpy road. Some obstacles are in the mortgage broker’s hands, while some are in the lender’s. Constant communication is key as it is now common for closing dates to get pushed around.
- Know the key terms before entering into the process: Though a good broker or lender should spend the time to educate you on all of the key terms that you will be working with, under current conditions we are hearing that many professionals simply are not finding the time, or due to extreme volume are not picking up on the queues that their clients may not be following along. The Consumer Financial Protection Bureau offers a free glossary here.
- Gaining a full understanding is your responsibility: With everything moving at warp speed in back offices, it is not only your right but also your responsibility to ask your representatives to slow down and thoroughly explain your mortgage. Ask lots of questions, multiple times if necessary, and do not feel as if you are a burden if you do so. Since this is what lenders do everyday, the process comes as second nature to them, so they may inadvertently glaze over very important details.
- Making sure you payments reach the lender on time is your responsibility: Once your mortgage is secured, it is common for there to be a delay of a few months in receiving your first mortgage bill as the final mortgage servicer is assigned and finalized by the lender. However, you are still responsible for making your first and all subsequent mortgage payments during that timeframe, and you should make certain that your closing packet includes mortgage payment coupons for the first few months of payments with clear information on where to send the payments. Do NOT wait for your mortgage bill to arrive, assuming no payments are due beforehand. Read your closing disclosure closely to confirm when the first payment is due and submit it accordingly with the mortgage payment coupons to the interim servicer.
This is not meant to downplay the amazing job that many mortgage brokers and lenders do on a daily basis, rather only meant to bring attention to how the current landscape has provided several speed bumps on the road to refinancing or securing a mortgage, and has made their jobs more challenging. The historically low interest rates, however, make it very worthwhile for many borrowers to move forward with the process, and our team at Centerpoint is always available to provide you with resources, guidance, and assistance along the way.