The Loan Process: Why Does It Take So Long?

The Loan Process: Why Does It Take So Long?

You submitted your loan application two weeks ago. But, you have yet to hear back from your lender. You may begin wondering, "What's the hold up?" Well, it could be any number of things. In any case, do not fret. Your loan application will get processed. It just may take a little bit longer than you had initially expected.

To help you better understand how the loan process becomes delayed, here's a quick list of few common bottlenecks lenders face.

Internal Coordination

During loan processing, your application will pass through the hands of 20 mortgage professionals, at least! And with so many people handling your application, it's easy for processing to get backlogged. Remember, your file must be checked by the processing team, the underwriting team, and the settlement team – in that order. That's a lot to coordinate!

Influx of Loan Applications

With interest rates near record lows, you may be considering locking in some new mortgage terms. But, you're not the only one with that thought. When rates drop, volume goes up. This could certainly equate to a longer processing time for your mortgage application.

Obtaining Verification

Processing is most commonly delayed by document verification. Remember, lenders need to fully assess a borrower's risk before choosing to approve or deny a loan request. Among others, this means verifying employment with managers, obtaining mortgage history from credit bureaus, and acquiring rental records from previous landlords. Confirming this information can take time - especially if your references are difficult to contact or less than cooperative.

Doing More with Less

As a result of the subprime mortgage crisis, lenders are now subject to stricter lending standards. Re-examinations and verifications of all applicant documentation are a necessity. Employees must adhere to the robust guidelines and accommodate the ever-growing list of compliance checks, extending the processing timeline.

Speeding Up Processing: Some Helpful Tips

Never fear. There are a few steps you can take to help simplify the job of your lender and speed up that loan process.

First, be available. While processing and underwriting your loan request, your lender may ask for additional information. Among others, they may have questions regarding a lapse in employment history, a maxed out credit card, or a sudden drop in income. No matter the query, make sure to respond promptly. Be available and willing to answer questions.

Second, provide all requested information upfront.One of the most important components to shortening the loan process is – accuracy. Omitting your employment history, excluding open credit card accounts, or fudging past debts will not help you secure a better interest rate or loan. In fact, it will only add to the complexity and elongate your processing time. Lenders will verify all information submitted via loan application.

Last, do not be afraid to ask questions. If you are unsure or confused by any part of the application, speak with your lender. It's better to address any issues upfront, than to leave questions blank or omit any documentation.

To learn more about what you can do to speed up your loan process, read our blog post Four Ways to Simplify the Loan Process.