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SW Financial Literacy
Lending Timeline
How long does it take to get a farm ground loan?
What is all happening during my loan request?
What should I be doing?
Here are details to help you understand the process and increase your confidence throughout the timeline. I’ll go into some detail on each category below. Please note the many disclaimers, as there are hundreds of ‘ifs’ that will deviate from what I have included.
Disclaimer: This timeline is, generally speaking, of a typical, average request. Timelines can and will vary.
Financials & Application Submitted
Different lenders and loan types will alter the information needed for a loan request.
*The information needed to start generally includes:
Proof of identity card (I.E. driver’s license)
Social Security Number
Date of Birth
Current balance sheet
Proof of income via W-2 and/or tax returns
Details of desired credit request
Verification of assets or debts
Completed loan application
Additional historical or future projected financial details often required for larger or more complex requests
The bank cannot start on the loan timeline without all information up front. If something hasn’t been provided, they aren’t making any progress with your request.
The full lender process takes around 30 days, so get preapproved before placing your bid. This allows time to accurately get everything in place. Most land auctions close 30 days after the sale. If you haven’t at least talked to a lender before the sale and started gathering information, don’t expect to have everything ready in time for closing.
*This is not an exhaustive list.
Review of Financials (2 weeks)
All the information provided up front is organized to allow for consistency in loan review. The lender will take your financial information and put it into their system or programs, gauging your risk and ability to make repayment. A credit bureau report is also being pulled to view your repayment history with other lenders.
After all questions concerning your financials and application have been answered, a credit decision is made by a review team. Your request may be approved or there could be adverse action. Adverse action would be a changing of your terms from the original loan request (a condition), or it could be an outright denial.
There are heavy regulations around how your financial information is gathered, used, reviewed, and how and when the credit decision is communicated to you. It is the lender’s responsibility to follow these regulations. Legally speaking, the review of financials could take 30 days. Talk with an attorney to learn more about this.
Communication of Terms (1 day)
The lender’s credit decision is communicated to you. If you have been approved and are ready to move forward with no changes to your loan request, next steps can begin.
If you have been conditionally approved or declined, you can make adjustments to your credit request to try to change the decision. Know that by making any change, you are moving back to the previous step, and a new 2 week window to review financials will begin.
Appraisal Ordered (2 weeks)
An appraisal request will be made by the lender to verify your collateral position through the value of the asset. The appraiser will compare your asset with the sale prices and asset valuations of similar properties in your area. You may be contacted by the appraiser if they have questions about your property.
If the appraised value comes in below expected figures, it could impact the terms of your financing.
Title Insurance Ordered (10-14 days)
The appraisal and title can be done simultaneously, so the two weeks it takes to complete each of these should overlap. Your lender will initiate the title request.
Title is completed to ensure you get clean ownership of the property. It reviews the collateral being taken to make sure there aren’t any unexpected liens or claims to the property. If there is an unexpected lien (second lender, mechanic’s lien, etc.), those need to be cleaned up before the transfer of the asset can be completed.
Title insurance is also helps protect you if someone lays claim to your property after you have taken ownership.
Documents Prepared (2-3 days)
Information from the appraisal and title are needed before documents can be completed. Interest rate also must be determined based off the lender’s recent cost of funds. Loan closing date and time are scheduled now, just a day or two in advance if not already predetermined. How and where funds are being moved to will be sorted out between seller, title company, and lender.
Loan Closing (1 day)
If you want to read the loan documents front to back, or have your attorney review, you probably want to request to do this a day or two in advance. Have all the right signers show up. Ask questions if you don’t understand. Make sure you know:
when you will be billed
when payments are due
how much payments are
how long your interest rate is good for
if there are prepayment penalties
CONGRATULATIONS! You made it through!
Pro Tip: If information is requested of you at any point in this timeline, the timeline stops or may even reset. Get the requested information returned within a day. I have gone through this exact same timeline with producers, and without timely responses it can take a year or longer to complete!
Disclaimer: Timeline and requirements within each step can vary based on: lender requirements, state, legal findings, legal documents, complexity of deal, size of transaction, purchase agreement, seller request, staffing, pipeline of lender, pipeline of appraiser, pipeline of title company, and many other reasons. Consult with an attorney.
Thanks, and have a great day!
Grant
All views expressed on this site are my own and do not represent the opinions of any entity whatsoever with which I have been, am now, or will be affiliated. Information provided is authentic to the best of my knowledge, and as such, is prone to errors and the absence of key details. The content of this blog is for entertainment and informative purposes and should not be seen as professional advice to finances or any other field.