Land Survey in Mortgage Applications: Timing, Importance, and Cost

When applying for a mortgage, one crucial step many homeowners may encounter is a land survey. This article explores when land surveys are requested in the mortgage application process, how long it typically takes, the importance of a land survey, and the costs involved. Additionally, we will discuss the timeline from ordering a land survey to receiving a final decision from the lender.

When is a Land Survey Requested in a Mortgage Application Process?

A land survey is typically requested when the mortgage application has been submitted and the lender has completed an initial review of the borrower's financial information. This usually occurs during the underwriting phase, where the lender assesses the property's value and condition as part of the overall risk evaluation.

Timeline of the Mortgage Application Process

Application Submission: The borrower submits the mortgage application and required documents. Initial Review: The lender reviews the financial information and property details. Order a Land Survey: If the property is deemed suitable, the lender will request a land survey to confirm property boundaries and identify any potential issues. Survey Completion: The completion of a land survey can take a few days to a couple of weeks depending on the surveyor's schedule and the property's complexity. Underwriting Decision: After receiving the survey, the lender incorporates this information into their evaluation. The final approval or denial may take several days to weeks, depending on the lender's processes and additional information required.

In total, from the point of ordering the land survey to receiving a final decision, it could take anywhere from a week to several weeks, depending on various factors.

Why is an Up-to-Date Land Survey Required?

An up-to-date land survey is typically required by mortgage lenders to confirm the boundaries and contents of the land they are financing. This ensures the property is worth the funds they are lending. Generally, your lender will expect you to pay for the surveyors fee as part of your closing costs.

Failing to order a land survey promptly when the offer is accepted might cause delays in the closing process, potentially adding a couple of weeks to the timeline. In most cases, it is the seller who pays for the survey, and the cost is usually around $500.

The Importance of Knowing Property Boundaries

The boundaries of a property serve as the collateral for a loan. Lenders may require a survey or rely on existing plats and surveys. If the land has a recorded plat by the city with zoning ordinances, the boundary lines and setback ordinances for construction will be known.

The county tax authority has recorded surveys filed with the county, which can be found in a county tax office or online on their website using names, addresses, legal descriptions, or County property ID. These records are crucial for defining property boundaries accurately.

If you take 5 acres out of 50 and wish to sell or buy the 5 acres, a survey is necessary to identify the property boundaries. This survey would be filed with the local county records.

Foreclosure issues can arise from incomplete or inaccurate legal descriptions. For example, someone may build a house on part of their acreage, subdivide the property with the tax authority as a 5-acre homestead for tax purposes, but not record a survey. This can result in a lender losing the property if the owner defaults on the loan.

Clear property boundaries are essential for repossession purposes. Lenders cannot repossess property they can't clearly define.

Examples of Land Survey Importance

During negotiations for the repurchase of a loan gone bad with Fannie Mae, I discovered 3 parcels identified as collateral for the loan. An appraisal only had 2 Assessor Parcel numbers. A small piece of land on the other side of the road was included in the foreclosure. Fannie Mae repossessed property that was free and clear and not part of their collateral, leading to potential legal challenges and damage claims.

Knowing what you are buying, selling, lending on, or repossessing through a clear understanding of property boundaries is critical to avoid any legal or financial mishaps.

Conclusion

A land survey is a significant part of the mortgage application process. It helps ensure property accuracy, prevents financial losses, and aids in the timely approval or denial of mortgage applications. Understanding the timing and importance of a land survey is crucial for buyers, sellers, and homeowners.