Back in the good old days, pre-mortgage crisis, you could get a fully underwritten mortgage approval the same day.
In fact, you could get approved for a mortgage by the early afternoon if you submitted a complete loan package that same morning. In 2004-2007, this was basically the norm.
Then things slowed down a lot, and eventually the process changed considerably. Gone were the same-day approvals and in their place came long waiting periods. We’re talking weeks to get approved for a mortgage.
Instead of quickly being given a conditional loan approval that required many items to be delivered after the fact, lenders began collecting lots of documentation upfront to get a squeaky-clean loan package the first time around.
The logic was sound – why rush out an approval if it turns out the borrower isn’t truly qualified once all the numbers are verified? It could prove to be a waste of the mortgage underwriter’s time.
At the same time, making a buyer wait weeks to show a seller they’re qualified to buy their home is also problematic.
Guaranteed Rate Red Arrow Approval Express
Well, it seems things are shifting back to speed again, a move intended to level the playing field for all-cash buyers and those who need a mortgage to buy a home. This is especially important in the ongoing seller’s market we’re experiencing.
The new no-cost “Red Arrow Approval Express” from Guaranteed Rate allows prospective buyers to get a “real approval” in as little as four hours.
By real, they mean an automated underwriting system approval, such as Desktop Underwriter (DU) from Fannie Mae, or Loan Prospector (LP) from Freddie Mac.
In order to get this real loan approval, applicants need to submit W-2s, paystubs, tax returns, and bank statements. So there is some burden on the borrower to get their ducks in a row and present a full loan package as well. It’s not magic.
Guaranteed Rate will pull the borrower’s credit report to determine their creditworthiness as well.
Assuming everything looks good, borrowers will be able to present their enhanced pre-approval to real estate agents and home sellers almost immediately to show them they mean business.
Even if you haven’t decided on a particular property, you can use this free service.
It’s Still Not a Final Loan Approval
While this new service from Guaranteed Rate is a great idea, and one that should make it easier for everyone to participate in the very competitive real estate market, it has its limitations.
While it might be known as a real approval, it’s not a final approval. That is to say, you’ll still need a Clear to Close (CTC) issued by the bank before you can actually get your mortgage.
As noted, these initial approvals are conditional and not a guarantee. Things can and do happen after the fact that can jeopardize a pre-approval.
For example, if you’re unable to provide certain supporting documents, or clarify issues brought up by the underwriter, it could lead to a loan denial.
Other things may be discovered throughout the loan process that could sink a loan application, such as an unexpected drop in credit score or an unusual bank deposit.
Then there’s the mortgage rate environment, which changes daily. If you were borderline approved, rising rates could push you out of affordability if there’s a particularly bad swing and you didn’t lock.
End of the day, until your loan is CTC and funds, plenty can go wrong. But I suppose that’s true no matter where you apply. So the Red Arrow Approval Express does give you the advantage of getting a more robust pre-approval in hand, quickly, which could help you land your dream home.
Just remember that you’ll need to hold up your end of the bargain, and be diligent about getting things like bank statements and tax returns to the lender quickly if you want them to spit out an approval just as fast.