This guide covers how to avoid delays in mortgage loan closings. When homebuyers enter a real estate purchase contract, the buyers and sellers agree on a tentative closing date. Normally, the closing date is set between 30 and 45 days from the purchase contract date.
Many real estate agents will agree that delays in home closings happen due to the buyer’s lender, and an extension is required. Delays in mortgage loan closings do happen. Many times, delays in mortgage loan closings can be avoided. The lender will need the mortgage loan applicant’s as well as the cooperation of all parties involved in trying to meet the targeted closing date and avoid delays in mortgage loan closings.
How Can You Avoid a Delay in Closing?
Taking a few proactive measures can make the loan closing process smoother and faster.
- Complete Documentation: Submit accurate and prompt financial documents, such as income proof, employment verification, tax returns, and others, as requested by the lender.
- Pre-Approval: Before starting your home search, obtaining a mortgage pre-approval can significantly speed up the closing process. A pre-approval indicates that a lender has already evaluated your credit and financial information and has conditionally approved you for a loan up to a certain amount.
- Responsive Communication: Stay constantly with your lender, real estate agent, and other parties involved. Quick responses to requests for additional information or clarification can keep the process moving.
- Use a Reputable Lender: Collaborating with a trustworthy and prompt loan provider can considerable impact. Experienced lenders often have streamlined processing and better problem-solving capabilities, which can prevent delays.
- Schedule Appraisal Early: Since property appraisal can be a bottleneck in the loan process, schedule it as soon as possible. Quickly resolving any appraisal issues can significantly reduce total processing time.
- Legal and Title Checks: Work with a knowledgeable title company or legal advisor to ensure no title issues could delay closing. Resolving such issues beforehand can prevent surprises down the line.
- Inspect Early: It’s best to conduct a property inspection early in the home-buying process to have enough time for negotiations based on the findings.
- Understand Closing Costs and Procedures: Be prepared with the necessary funds for closing costs and understand the procedures that will take place on closing day. Misunderstandings or last-minute financial arrangements can lead to delays.
By taking these steps, you can ensure that your loan closing process is as efficient and practical as possible. Speak With Expert To Avoid Delay In Closing
Teamwork Avoids Delays In Mortgage Loan Closings
If everyone is on the ball from day one, mortgage closings should not be delayed. However, the mortgage lender cannot do everything by themselves without the cooperation of the following:
- buyers
- sellers
- realtors
- attorneys
- title company
Third-party vendors such as the following vendors:
- appraisers
- insurance companies
- other vendors involved in the real estate transaction
Processing Correctly Avoids Delays In Mortgage Loan Closings
Lenders should submit a complete mortgage loan package and process it the right way the first go around to avoid mortgage conditions. When borrowers get conditional approval, they will get conditions that need to be met to clear conditions and get a clear-to-close.
Examples of submitting a mortgage application as complete as possible to the underwriter include providing all of the information that the underwriter requires to proceed with underwriting the loan. For example, if you are divorced, a divorce decree will be required.
Many times, divorce decrees are incomplete. Underwriters need every page, from the initial filing petition to the finalized divorce decree. Any missing pages will be corrected. Underwriters will most likely condition that on the conditional mortgage approval. Another example is letters of explanation for prior derogatory credit.
Delays in Mortgage Loan Closings With Quality Control Review Before CTC
There are many mortgage lenders that once the underwriter signs off on mortgage approval, the whole mortgage package goes through their Quality Control department before a clear to close. The Quality Control underwriter will review the whole mortgage loan package for a final time before issuing a clear to close.
Clear-to-close (CTC) is when the lender is ready to prep docs and fund. After the CTC, the lender preps the closing docs and sends the mortgage package and the wire to the title company.
Quality Control normally takes 24 to 48 hours, depending on the lender. Very rarely does anything drastic happen during the Quality Control Review Process. But if it does, there can be delays in mortgage loan closings.
Why are Lenders Taking so Long to Close?
Lenders may take a long time to close a loan due to various factors, including increased scrutiny and regulation.
Following the financial crisis, there has been heightened regulatory oversight, requiring lenders to adhere to strict guidelines that involve thorough checks on credit, employment, and financial history, thereby extending the closing process.
Additionally, periods of low interest rates often result in a surge of loan applications, leading to backlogs in processing new home purchases and refinancing applications.
The complexity of a loan also plays a role; for example, jumbo mortgages or loans involving special programs for first-time buyers often entail more intricate underwriting processes. Further delays can occur if there are issues with the property appraisal, discrepancies in property valuation, or legal challenges regarding the property’s title.
Even technological and processing issues, such as system outages or software integration problems, can contribute to prolonged closing times. Consequently, depending on these factors, the timeline for closing a loan can vary significantly, sometimes extending from a few weeks to several months. Click Here To Find A Lender For Closing Loan Without Any Delay
Mortgage Conditions Requested By Underwriters
No matter how perfect the mortgage application has been processed and submitted to underwriting, mortgage conditions are inevitable and do come up. The minute borrowers get a list of conditions the underwriter is requesting. Please submit whatever conditions they ask for as soon as possible.
Borrowers must realize once mortgage conditions are submitted to underwriting after the conditional loan approval,, the underwriter will not drop whatever they do. It normally takes 24 hours to 48 hours to clear mortgage conditions.
If the conditions requested are not submitted all at once, the file will get kicked back. This will cause additional delays in closing. When it gets re-submitted back to underwriting, the 24-hour to 48-hour waiting time restarts. Not submitting conditions promptly to underwriting is one of the biggest reasons for delays in mortgage loan closings.
Low Appraisal
Another main reason for delays in mortgage loan closings is when the appraisal returns with a lower value than the purchase price. Appraisal rebuttals take time, as does the re-negotiation of the purchase price. Delays in mortgage loan closings due to low appraisals do not happen often, but it does happen. I strongly recommend ordering the home appraisal as soon as possible if you run into home appraisal issues.
Letter of Explanation Requested By Mortgage Underwriters
Every derogatory credit item on the credit report needs a letter of explanation on the circumstances of why it went into arrears. Bankruptcy papers require all pages, from the initial filing petition to the discharge papers. The same goes for foreclosure and short sale documents.
Foreclosure paperwork, including the recorded date filed in the county’s recorder of deeds office, needs to be provided, as well as the HUD settlement paperwork if the borrower had a pshort sale,
All bank statements need to include every single page of the past two month’s bank statements, including blank pages. 401 K statements need to include a withdrawal agreement in the event the holder needs to make a withdrawal or borrow against it.
What Happens if a Buyer Decides Not to Close?
Suppose a buyer decides not to close on a property purchase. In that case, the consequences largely depend on the terms specified in the purchase agreement and local legal provisions.
Typically, if a buyer backs out without a justified reason as outlined by the contingencies in the contract—like issues with financing, home inspection results, or an appraisal that comes in under the purchase price—they may forfeit their earnest money deposit.
This deposit is made at the contract signing and signifies the buyer’s commitment to the transaction. Additionally, suppose the buyer withdraws from the deal without any contingency-related justification. In that case, the seller might have legal grounds to sue for breach of contract. This can lead to a court mandating the sale’s completion or awarding damages for the seller’s financial losses.
Buyers can often find contingencies in real estate contracts that enable them to end the agreement without facing fines under specific circumstances, and these contingencies can also safeguard their earnest money deposit.
In cases where the buyer’s change of heart is driven by personal reasons or changes in circumstance, negotiations with the seller might be possible. The buyer could offer compensation for certain expenses incurred by the seller or assist in finding a replacement buyer to facilitate a smoother transition and mitigate financial repercussions. Furthermore, for buyers who are:
- Real estate investors or frequent participants in the property market.
- Backing out of a deal can adversely affect their reputation.
- Potentially complicating future transactions.
Buyers should consult a real estate attorney before finalizing a purchase to ensure they fully comprehend their contractual responsibilities and legal alternatives.
What Happens if the Exchange of Contracts is Delayed?
Suppose the exchange of contracts is in a property transaction. In that case, completing it on time leads to several problems for buyers and sellers. Such delays breed uncertainty and stress, as both parties are legally bound once contracts are exchanged, posing a risk of the deal falling through.
Financially, buyers might lose their mortgage offers if they expire before the exchange. At the same time, sellers could incur ongoing costs for a property they expected to sell. Logistically, delays disrupt moving plans, potentially affecting temporary housing arrangements and causing delays in related transactions.
Moreover, significant delays might open doors for renegotiation or even lead to withdrawal from the deal if it becomes financially or logistically untenable. It is important for everyone involved to communicate effectively to address and resolve delays quickly, which can help prevent complications.
Gustan Cho Associates is a national mortgage company with no overlays on government and conventional loans. Over 80% of our borrowers could not qualify at other lenders due to lender overlays. Borrowers who need to qualify for a mortgage with a lender with no overlays, please get in touch with us at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are available evenings, weekends, and holidays seven days a week. Click Here To Talk With Us For Your Mortgage Enquiry
FAQ: How to Avoid Delays in Mortgage Loan Closings
- 1. Why are lenders taking so long to close? Lenders may take longer to close due to various factors, including increased regulatory scrutiny, a surge in loan applications during low-interest rates, and the complexity of some loans, like jumbo mortgages. Issues such as property appraisal discrepancies and technological glitches also contribute to delays. Overall, the closing timeline can vary significantly, sometimes extending well beyond the typical 30 to 45 days.
- 2. What should be included when submitting a mortgage application to avoid delays? To avoid delays, submit a complete mortgage application package. This includes every required document, such as divorce decrees, all pages of bankruptcy filings, foreclosure documentation, and detailed explanations for any derogatory credit items. It is crucial to provide complete bank statements and any relevant documents about financial assets, like 401 K statements.
- 3. What happens if a buyer decides not to close? If a buyer backs out without a justified reason outlined by contract contingencies (e.g., financing issues, unsatisfactory home inspection), they may forfeit their earnest money deposit. Furthermore, they could face legal action for breach of contract, potentially resulting in a court mandate to complete the sale or compensate the seller for losses.
- 4. How can delays in closing due to a flipped property be addressed? When buying a flipped property, ensure the lender is informed, as it may require additional appraisals and checks, which can cause delays. Understanding lender rules regarding flips and ensuring all checks are completed can mitigate potential delays.
- 5. What are the consequences of a delayed exchange of contracts? Delays in exchanging contracts can create financial strain, logistical challenges, and legal complications. It disrupts moving plans and may lead to renegotiations or even deal cancellations if the delay becomes untenable for any party involved.
- 6. How can you avoid a delay in closing? To minimize delays, ensure all documentation is complete and submitted promptly, obtain mortgage pre-approval, maintain open and responsive communication with all parties, schedule appraisals early, and ensure thorough legal and title checks. Being well-prepared for closing procedures and understanding all associated costs also helps avoid delays.
- 7. What is the role of teamwork in avoiding mortgage closing delays? Effective teamwork among all parties, including buyers, sellers, realtors, attorneys, and third-party vendors like appraisers and insurance companies, is crucial. Everyone needs to be proactive and cooperative to ensure a smooth closing process.
If you have any additional inquiries or specific situations, please contact a professional at Gustan Cho Associates. Their personalized advice and solutions can help address any mortgage concerns.
This blog about How to Avoid Delays in Mortgage Loan Closings was updated on April 15th, 2024.
