Do you know when to lock-in your rate or when to pay for your appraisal?
Is it your Intent to Proceed?
These are two mortgage action-items that buyers will need to complete once their contract has been ratified.
Over the past week, I have seen two incidents when there was confusion between home buyers and Bank of America. Understand that my clients have used B of A for a long time without problems, but these two recent hick-ups may be indicative of an internal procedural error as they work to comply with the new CFPB enforced TRID guidelines.
Yes, you can still shop for a loan and the CFPB was created to help and protect you (the consumer), but the lenders are extra cautious these days about violating any guidelines.
My tip is to start selecting a lender early. If you shop after your contract is ratified then you may be in default of your sales contract and potentially lose your deposit or get sued.
That may sound like the story of chicken-little (the sky is falling…) but your sales contract is a binding contract between you and the Seller with dates and deadlines.
Proceed with the mortgage and lock-in later
To give you some context, both of these sales are in Vienna, Virginia and both used the NVAR Sales Contract.
Paragraph 14 states:
Buyer will make written application for Specified Financing no later than seven (7) days after the Date of Ratification.
and the attached Conventional Financing Contingency states:
This Contract is contingent upon an Appraisal. Purchaser shall have until 9 p.m. 21 Days following the Date of Ratification to obtain an Appraisal (“Appraisal Deadline”).
The confusion can start at the CFPB web site where you can get the impression there is a 10-day window when you read this article on their web site: What do I have to do to apply for a mortgage loan?
The critical moment is when the Buyer decides to work with a lender, and that only happens when you confirm you intend to proceed with them.
It is at that moment (acknowledging your Intent to Proceed) is when the lender can collect your appraisal fee (not before) and get the appraisal ordered. That is when the appraisal ball gets rolling.
Remember, the Appraisal Contingency started the day after the Date of Ratification.
Appraisals require a visit to the house
Probably the most scrutinized player in the real estate meltdown of 2008 were the appraisers. The Dodd Frank Act established new restrictions specifically making sure drive-by appraisals couldn’t take place and that a written appraisal was completed.
Appraisal firms need to be at arm’s-length from lenders.
So, appraisal requests now are sent out from the bank to find the least expensive appraiser. Once the appraiser accepts the job, then she needs to visit the property, take photos and head back to the office to find six nearby comparable recent sales. The analysis will involve calculations and adjustments on square footage, condition, location and more. An appraisal takes time to complete because it gets scrutinized to verify the facts.
There are more steps involved in the mortgage QC process, and, if the Buyer didn’t click Intent to Proceed shortly after the Date of Ratification, then the appraisal deadline may arrive resulting in a Notice from the Seller.
Can you see that days may be slipping by here?
Although we may be living in the age of the Rocket Mortgage, there are still plenty of people involved in the process of completing a residential real estate transaction.
If the buyer doesn’t click the link confirming her Intent to Proceed then all hands are tied.
What seems to be happening at Bank of America is that “locking in a rate” and “Intent to Proceed” are being used in the same sentence by the loan officers in the call center. These are two different action-items, but ,for a consumer who is nervous about rejection, they seem like the same action. Better customer service training can fix this presentation and break out each action item when presented to the buyer.
The CFPB is well intentioned, but buyers aren’t lawyers and Intent to Proceed sounds pretty intimidating.
What you should know
- Shop lenders before you find the house.
- Click “Intent to Proceed” in your secure email from the bank.
- Lock your mortgage interest rate or float until you are ready
- Ask if the appraisal has been ordered
- Know Dates and Deadlines
By the way, I am a Realtor and am not a loan officer. I am not affiliated with any mortgage lender.
If you have questions then send me an email.