Longer closing times

We have seen much longer closing times from lenders. We all think that since business is down the closing times should be faster, that the lenders should be knocking loans out left and right. The things we all forget are that since the down turn many lenders have greatly reduced their staff and of course guidelines have tightened up significantly.

A big key to delays is the increase in FHA loans. Since "subprime" is gone the number of FHA loans being submitted to lenders has skyrocketed. They can't handle the huge increase with the reduction in staff that has occurred. Also, many brokers who are new to doing FHA loans do not know the guidelines and all of the additional documentation needed to submit these loans properly. This lack of knowledge just increases the delays because underwriters have to sort through these bad files, basically wasting time on loans that should never have been submitted.

The average "approval" time for a submitted FHA loan is approximately 8 days. That means that the loan package sits at the lender for up to 8 days before anyone looks at it. Once the approval has been sent, they are taking upwards of 4 days to clear any outstanding conditions. As you can clearly see that's 12 days of down time. These days are added onto the "normal" closing times.

The way to expedite closing times is to make sure the broker/lender has FHA experience, make sure you know the lenders time frame on approvals, make sure all expectations are communicated up front with the broker/lender and all parties involved.

These delays are based on FHA loans, many conforming non FHA loans are taking much less time to close. If you have a borrower who is putting down 20% on a purchase that loan should close in 2 weeks, as long as no unforseen problems arise. Which we all know never happens.