Mortgage delays reported as lenders struggle to keep up with demand

You’ve probably heard all over the news and the internet that mortgage rates have literally never been lower than they are right now.

As of this writing, Freddie Mac estimates the average rate for a 30 year mortgage is 2.87%, which is just .01% from being the lowest mortgage rate of all time. In fact, that record has been reset 9 times this year, which is also a record in and of itself.

Additionally, we’re seeing substantial growth in the number of home sales in 2020. Despite the chaos surrounding COVID-19 and the state of civil unrest across the country, Fannie Mae forecasts a 14% increase in new home sales as compared to 2019.  

With such low rates and a white-hot housing market, naturally new loans must be flying out the door like hotcakes right now, right?

Well...not so fast.

Expect delays in mortgage processing

It turns out that lenders have been completely overwhelmed by the wave of new applications for new home loans and mortgage refinancing in recent months and they are completely backlogged as a result.

Lenders and borrowers alike are reporting significant delays throughout the application process right now. Some lenders are even opting not to drop their rates as low as they can simply so they can get caught up with the onslaught of new applications that have been pouring in.

So even if you’re able to obtain a mortgage or refi right now, it might not be at as low of a rate as you had expected.

So how long is the wait?

If you’re in the market for a house right now, how long should you plan on waiting for your mortgage application to be processed?

According to the San Francisco based digital mortgage closing firm, Snap Docs, you might be looking at a 45-120 day waiting period as opposed to the usual 30-45.

Jolie in Boise, ID mentions “My husband and I have excellent credit history and a sizable down payment and we still experienced substantial delays obtaining a loan for our recent home purchase. Luckily we were able to get it sorted out in time, but it was a little stressful because we didn’t want to end up losing out on the house to another buyer who could come up with the funds quicker.”

What are mortgage lenders doing to catch up?

Some of the larger mortgage lenders like Quicken Loans and United Shore Financial Services are hiring hundreds of new employees in an effort to keep up with the growing demand.

However, not all lenders have adopted that same strategy. Some lenders have been hesitant to add new staff en masse out of fear that the booming real estate market could be a bubble that bursts in the coming months as we begin to see more of COVID-19’s long term impact on the economy.

What this all means for you

This news is not cause to panic if you’re looking for a home loan or to refinance your mortgage in the near future. It should help you set realistic expectations.

Right now most lenders are prioritizing purchase transactions in order to meet closing deadlines, so refinances are where you are most likely to encounter significant delays.

Our best advice is to prepare for delays, and make sure to get quotes from multiple lenders to ensure that you’re locking in at the best price.