In the Mix

Financing Contingency Period Can Be Longer Than You Think

Be sure to advise clients to allow plenty of time for the very important Financing Contingency Period. Did you know….

FACT: The new 2010 Good Faith Estimate (GFE) will not be given to a buyer seeking a mortgage until after the buyer has reached a binding agreement on a residential property. The lender is allowed three (3) business days to issue this GFE.

FACT: The buyer has as long as ten (10) business days to shop around with different lenders and compare GFE’s. The fees quoted on the GFE are good for those ten business days BUT the interest rate may or may not be “locked in”.

FACT: Once the buyer has decided upon a lender, the buyer makes written loan application and may or may not lock in the interest rate. Depending upon whether the interest rate has changed since the original GFE was issued by the chosen lender, a new GFE may need to be issued and the lender has up to three (3) business days to do this.

FACT: HERA (Housing and Economic Recovery Act of 2009) requires that a buyer seeking a mortgage have four (4) full business days after loan application to “reconsider” before the lender can order any appraisal and get the ball rolling on the buyer’s loan.

Sooooo, a buyer eager to begin the mortgage process can do so in as little as a day, with the appraisal ordered four (4) business days later OR it could take as long as 16 business days PLUS four (4) more business days before the appraisal can be ordered (please note that 20 business days is one month on the calendar)!

Up to a month before the appraiser even receives the assignment? It can happen. Agents, please be sure to plan ahead. Also, be sure to advise clients to allow plenty of time for the very important Financing Contingency Period (and remember that the FCP is counted in regular days, NOT business days).

Broker Support is recommending that the FCP be 45 days for Conventional loans and up to 60 days for FHA, VA and USDA loans.