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
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.
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 Buying a Flip?
If buyers are purchasing a home that the seller has purchased 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 closing. This is because there are rules regarding 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 were not initially disclosed.
An example includes the lender finding out that the subject purchased 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 regarding flips. Many lenders do not catch this fact until the file goes through QC, Quality Control, just before a clear-to-close issuance.
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.
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.
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.
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:
- title company
Third-party vendors such as the following vendors:
- 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 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 firstname.lastname@example.org. We are available evenings, weekends, and holidays seven days a week.