Don’t Wait Too Long to Start Your Mortgage Approval
Purchasing a new home is exciting, but that excitement can quickly turn into stress if you wait too long to get your financing in order.
A mortgage approval involves more than just the borrower and the lender. Depending on the type of mortgage, there may be several parties involved, including:
- Mortgage professional
- Lender
- Mortgage insurer
- Appraiser
- Title insurance company
- Lawyer or notary
- Realtor
- The borrower
Everyone has a role to play, and everything needs to come together before your mortgage can close.
We all lead busy lives, and it is easy to put things off until the last minute. But waiting until the eleventh hour to start the mortgage approval process can create unnecessary anxiety, limit your lender options, and potentially delay your closing.
So, when is it too late to start the mortgage approval process?
The answer depends on the type of mortgage transaction.
The Type of Mortgage Matters
The timing can vary depending on whether you are:
- Purchasing a home
- Refinancing your mortgage
- Transferring or switching your mortgage to a new lender
- Renewing with your current lender
Each situation has a different timeline, and some are more time-sensitive than others.
Mortgage Approval Timeline for a Home Purchase
Out of all mortgage transactions, purchases are the most important when it comes to closing on time.
If a purchase closes late, it can disrupt the seller’s plans, delay your move, create legal issues, and potentially become costly. This is why it is so important to start the mortgage approval process early.
As a general guideline, lenders often want your mortgage file to be fully complete well before closing. Ideally, your documents should be submitted and accepted at least ten business days before your closing date.
A fully complete file means the lender has reviewed and accepted the required documents and is not waiting for anything further from you.
Can things sometimes be completed closer to the closing date? Yes. There are situations where documents are still being collected or reviewed very close to closing. But that is not a comfortable position to be in, and it can create unnecessary stress for everyone involved.
How Long Should Your Closing Date Be?
For a home purchase, it is usually best to have a closing date of at least 30 days whenever possible.
A 30-day closing gives you more breathing room to complete the mortgage approval, satisfy lender conditions, arrange an appraisal if required, sign legal documents, and deal with any unexpected issues that come up.
That said, shorter closings can sometimes be accommodated.
For example, the property may be vacant, or the seller may want a quick closing. In a competitive offer situation, a shorter closing date may even make your offer more attractive.
Some lenders can close in as little as two weeks, and in certain cases, even faster. However, the shorter the closing, the more pressure there is on everyone involved.
If you are considering a quick closing, speak with your mortgage professional before writing the offer. A shorter closing date may limit your lender options, and that could affect the mortgage rate or product available to you.
Mortgage Transfer or Switch Timeline
A mortgage transfer, also called a mortgage switch, means moving your existing mortgage from your current lender to a new lender.
This is most common when your mortgage is coming up for renewal. Instead of automatically renewing with your current lender, you may be able to transfer your mortgage to another lender with a better rate or more suitable terms.
Switching lenders at renewal can potentially save you thousands of dollars over the term of your mortgage.
While a transfer can sometimes be completed in about 21 days, it is better to allow at least 30 days. If you start the process with less than 30 days before your maturity date, there is a greater chance the transfer could close late.
If you start with less than 21 days, there is a strong possibility that the transfer will not close on time.
What Happens if a Mortgage Transfer Closes Late?
A late mortgage transfer is not usually as serious as a late purchase closing, but it can still cost you money.
If your transfer will not close by your maturity date, you should contact your current lender and ask about renewing into an open mortgage. An open mortgage allows you to pay it out without a penalty once the new mortgage is ready to close.
Open mortgage rates are usually higher than standard mortgage rates, but you would typically only need the open mortgage for a short period.
The extra cost is not the full interest charged on the open mortgage. The additional cost is the difference between the open mortgage rate and the new mortgage rate.
For example, if the open mortgage rate was 9.00% and your new mortgage rate was 5.50%, the difference would be 3.50%.
If your mortgage balance was $350,000, the additional daily cost would be approximately:
$350,000 x 0.035 / 365 = $33.56 per day
While that may not seem like much, it can add up if the delay lasts several days or weeks.
The best approach is to avoid the extra cost altogether by starting the process early. Whenever possible, begin your mortgage transfer at least 30 days before your maturity date. More time is even better.
Delays Can Also Come From the Current Lender
Even when you start early, delays can sometimes happen because of your existing lender.
As your renewal date approaches, the new lender will need a payout statement from your current lender. This statement confirms the exact amount required to pay out your existing mortgage.
Some lenders issue payout statements quickly. Others take longer, which can delay the transfer even when everything else is ready.
Starting early gives everyone more time to deal with these potential delays.
Mortgage Refinance Timeline
A mortgage refinance is required when you are increasing your mortgage amount, changing the amortization, consolidating debt, accessing home equity, or restructuring your mortgage.
The refinance process is similar to a transfer, but it can involve additional steps. Depending on the situation, you may need updated income documents, a property appraisal, legal signing, and lender review.
A refinance typically takes up to 30 days to complete.
If you need funds sooner, there may be options to speed up the process, but faster closings can depend on the lender, lawyer or notary availability, appraisal timing, and how quickly documents are provided.
In some cases, using a lawyer or notary directly may help shorten the timeline, although it can add extra cost. If you are refinancing because you need funds by a specific date, start the process as early as possible.
Mortgage Renewal Timeline
A mortgage renewal is the simplest transaction if you are staying with your current lender.
In many cases, all you need to do is sign the renewal offer and return it before your maturity date. This can often be done quickly and with very little paperwork.
However, convenience does not always mean you are getting the best deal.
Your current lender’s renewal offer may not be the lowest rate or best product available. There may be better options with another lender, but switching takes more time than simply signing the renewal form.
For that reason, it is a good idea to review your mortgage options well before your renewal date. Ideally, start looking at your renewal options 90 to 120 days before maturity. This gives you time to compare rates, review your goals, and decide whether renewing or switching makes more sense.
Why Starting Early Matters
Starting the mortgage approval process early gives you more options and less stress.
It can help you:
- Avoid last-minute document requests
- Reduce the risk of closing delays
- Keep more lender options available
- Give time for an appraisal if required
- Allow your lawyer or notary enough time to prepare
- Compare mortgage rates and products properly
- Make better decisions without feeling rushed
A quick closing may be possible, but it is rarely ideal. The more time you allow, the smoother the process is likely to be.
Final Thoughts
We will always do everything we can to help your mortgage closing run as smoothly as possible. Quick closings can often be accommodated, but waiting until the last minute can create extra stress and may limit your options.
For a purchase, try to allow at least 30 days whenever possible. For a transfer or refinance, 30 days is also a good minimum. For a renewal, it is best to start reviewing your options 90 to 120 days before your maturity date.
Every situation is different. If you are buying, refinancing, transferring, or renewing and you are not sure how much time you need, reach out as early as possible. We would be happy to review your options and help you plan the best path forward.
