You can't lock, can't rush, and you'll have some work to do, but most lenders are giving some big perks to borrowers under the new loan refinance system. This new "how you refinance" may become the staple system for years to come. Personally, I think our industry has figured out a great way for the consumer to take control of their own destiny and truly become a partner with their lender. Here's how it works.
It's a partnership
The customer has never before been asked to be so much a part of their loan process. The new refinance system is a blend of technology and human interaction. The consumer can now largely control the speed of the process and truly partner with the lender to get big rewards. You see, lenders are rewarding clients that take the time to invest in their own loan process. This is both monetary (i.e. lower rates and fees) but is also realized by an easier process with less documentation (and even appraisal waivers!)
This is the first step of becoming an integral part of your loan. Sorry Quicken, but most every lender out there has their own form of a rocket mortgage. The application suites of today allow the borrower to pull their own credit, verify their own income and even securely provide bank statements to the lender. When a borrower does all of this, most lenders are granted waivers from the agencies. That just means they have to ask you for less stuff if you apply online.
Applying online tip: If you have your credit frozen, please unfreeze it before you apply online!
Uploading and Authorizing your financial docs
Getting docs to your lender may seem like nothing new. Correct, but it's not what you are getting to your lender, it's how. The days of printing or scanning or heaven forbid... mailing your loan documents to your lender are gone. With your authorization, your lender can (most of the time) digitally verify both your income and assets saving a boatload of time and last minute conditions.
Helping clear your conditions
Oh it's getting good isn't it? I mean, what is your loan officer even doing at this point you may think? Trust me, we still do more than our share. The key is that it's actually become easier for borrowers to handle their own conditions. It's more timely and the technology is so good with loan "apps" and "portals" that borrowers can be on top of what is needed before the processor has a chance to even type "hello" on a conditions email.
Borrowers should know that their loan officer is notified when the loan is approved, but will most certainly not be able to jump on them as fast as the borrower.
Getting your rate locked
Probably the biggest change is when you are able to lock your loan rate. In times past you could have shopped around to see which lender you liked and who could "lock" you at the best rate. Now, it's about who do you trust to partner with on your loan process.
Side Note: If locking is your thing, most banks are offering a 90 to 120 day lock because that's how long it's taking. Oh, and the rate is much higher because of the risk of a long-term lock.
It's much more efficient
Under the new refinance system, you cannot lock in until your loan is approved (more on that below); however the new way is way more efficient than the system of old. Think of it as a reserve/float to lock system. It's a hybrid lock system and here is how it goes.
The New System of Locking
You agree to a rate quote with your lender and they put your loan in process. They don't lock it until your loan is fully approved and clear to close. Because your loan officer doesn't have to lock for more than 15 days, he gets a much better price and passes those savings on to you. They can do that because there is minimal RISK on the part of the lender. They know the loan is going to close and most importantly, they don't have to hedge your lock. Hedging is when a lender takes out an insurance policy in the event rates go up while they have promised a rate to you. The longer a lock they give you, the more expensive the insurance policy.
What if rates change?
This is the beauty of the new system. This is not insider information nor is it a trade secret... it's just how the mortgage world works. Lenders are going to be quoting you pricing that is higher than you would get on a 15 day lock. There is also enough room in the pricing to shrug off a small uptick in rates during the time the loan is being cleared to close. What I'm saying is that there is a low chance that your rate will not be available when it's time to lock. Additionally, there is a chance you could get a better rate when it's time to lock. Remember, you can control (in part) just how fast your loan gets fully approved, and locked!
Small risk, big reward
So you take a small risk for the time it takes to clear your loan and your lender rewards you with a lower rate with very little downside. It's a win-win and it's how it's going to be for quite some time. Personally, I think it's a brilliant change that is highly beneficial for the consumer.
For more information, visit www.loanwithrick.com. ~Rick