Why does it take a few hours to finance a $100k auto loan, but 30+ days to finance a $100k mortgage?
In: Economics
Much of it also has to do with the complexity of underwriting. As somebody mentioned, an auto loan is typically five years and far easier to repossess. With mortgages, lenders have to have some idea of your income from all sources, how likely those streams of income will stay stable (or at least not decrease) over the life of the loan, and do their due diligence to comply with the more specific federal regulations, particularly post-crash.
The number of disclosures that must be provided to a customer even if the slightest thing had changed for the note/contract of a mortgage can significantly delay processing times. Moreover, it can also depend if the mortgage is a first mortgage or a refinance or a second lien of some sort. There are more layers of risk and the lender has to cover its ass.
And honestly, a $100k mortgage may close faster than a $500k mortgage depending on how complex the borrower’s income is (a single W2 or multiple 1099-Rs, social security, pension, beneficiary payouts, RMD…). Somebody seeking a $100k is more likely to have simpler income to prove with regards to ability to repay.
It’s a whole bunch of factors depending on those factors applying to the borrower, lender, collateral, and also the relationships between all of the above.
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