Delays In Mortgage Loan Closings On Purchase And How To Avoid Them

Gustan Cho Associates are mortgage brokers licensed in 48 states

This Article Is About Delays In Mortgage Loan Closings On Purchase And How To Avoid Them

When homebuyers enter into a real estate purchase contract, both the buyers and sellers agree on a tentative closing date.

  • Normally, the closing date is set between 30 and 45 days of the purchase contract
  • However, 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

Processing Right Way Avoids Delays In Mortgage Loan Closings

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 in order to clear conditions and get a clear to close
  • Examples of submitting mortgage application as complete as possible to underwriter include providing all of the information that is required by the underwriter to proceed with underwriting the loan
  • For example, if divorced, a divorce decree will be required
  • Many times, divorce decrees are incomplete
  • Underwriters need every page from the initial filing petition to the complete finalized divorce decree
  • Any missing pages will be conditioned
  • Underwriters will most likely condition that on the conditional mortgage approval

Another example is letters of explanation for prior derogatory credit.

Letter Of Explanation Requested By Mortgage Underwriters

Every derogatory credit item on credit report needs a letter of explanation on the circumstances why it went into arrears:

  • Bankruptcy papers require all pages, from the initial filing petition to the discharge papers
  • The same goes with foreclosure and short sale documents
  • Foreclosure paperwork, including the recorded date filed in county’s recorder of deeds office, needs to be provided as well as for the HUD settlement paperwork if the borrower had a prior short sale
  • All bank statements need to include every single page of the past two month’s bank statements including blank pages

401K statements need to include withdrawal agreement in the event holder needs to make a withdrawal or borrow against it.

What Happens If Buying A Flip?

In the event of buyers are purchasing a home that the seller has purchased it within the past year and are flipping it for a profit, it needs to be addressed with the lender:

  • Situations like this will cause delays in closings
  • This is because there are rules when it comes on home flips where two appraisals are required
  • There are many situations where delays in closings happen because at the last minute there are issues discovered that was not initially disclosed
  • An example includes, the lender finds out that the subject purchase property is a flip
  • If this gets discovered a second appraisal is ordered at the last minute which causes delays
  • Nothing is wrong with purchasing a flip
  • However, there are strict rules and regulations when it comes to flips

Many lenders do not catch this fact until the file goes through QC, Quality Control, just prior to a clear to close issuance.

Mortgage Conditions Requested By Underwriters

what is the 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 need to realize that once mortgage conditions are submitted to underwriting, the underwriter will not drop whatever they are doing
  • It normally takes 24 hours to 48 hours to clear mortgage conditions
  • If the conditions requested is not submitted all at once, the file will get kicked back
  • This will cause additional delays in closings
  • When it gets re-submitted back to underwriting, the 24-hour to 48 hour waiting time restarts

Not submitting conditions in a timely manner 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 comes back with a lower value than the purchase price.

  • Appraisal rebuttals take time and so does 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 in the event run into home appraisal issues.

Delays In Mortgage Loan Closings With Quality Control Underwriting Review Prior To CTC

There are many mortgage lenders that once underwriter signs off on mortgage approval, the whole mortgage package goes through their Quality Control department prior to 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 loan clear
  • After the CTC lender then 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 in the event, if it does, there can be delays in mortgage loan closings.

Teamwork Is What Avoids Delays In Mortgage Loan Closings And In The Mortgage Process

Teamwork Is What Avoids Delays In The Mortgage Process

If everyone is on the ball from day one, there should be no delays in mortgage closings.

However, the mortgage lender cannot do everything by themselves without the cooperation 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

Gustan Cho Associates is a national mortgage company with no overlays on government and conventional loans. Over 75% of our borrowers are folks who 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 contact us at 262-716-8151 or text us for a faster response. Or email us at [email protected]  We are available 7 days a week, evenings, weekends, and holidays.