Ways to Avoid Stress and Delays in Home Loan Closings
This article covers the ways to avoid stress and delays in home loan closings. This article was updated on June 21st, 2021.
All home closing should close on time. Delays should never happen. In this article, we will cover the following topics:
- Closing a home purchase transaction on time
- Not stressing during the home mortgage process
- Dealing with last-minute hiccups by the lender
- Case scenarios where home loan closings can get delays
We will cover ways of not stressing during the mortgage process and closing a home mortgage on time.
Closing The Home Purchase Transaction on Time
There is no reason why a home loan closing cannot close on time. Many realtors blame loan closing delays on loan officer incompetency. Home closing delays affects all parties. A delay in home loan closing will affect buyers, sellers, and realtors. Rescheduling a closing is not as simple as other tasks. Everything needs to be rescheduled. Time off from work needs to be rescheduled, Movers need to be rescheduled. Other tasks like schools and contractors coming to work need to be rescheduled.
Home Loan Closings is the finish line where all borrowers want to get to. From the time the borrowers apply for a mortgage until they get clear to close, they need to be very careful with their finances.
A home loan approval is not a guarantee that borrowers will close on their loan. A clear to close can be canceled anytime by the lender prior to closing. It is a great indication that it will. There are instances where borrowers work hard in getting a conditional loan approval by going through the following mortgage steps.
And due to one or another reason they end up getting a last-minute mortgage loan denial. In this article, we will discuss and cover the ways to avoid stress and delays in home loan closings.
Case Scenario on Delays on Home Loan Closings
Here are case scenarios of last-minute mortgage loan denials:
- Signing the mortgage loan application
- All mortgage applicant’s get a tri-merger credit report pulled
- Provide tax returns, W-2s, paycheck stubs, bank statements, and other documents
- Lenders will not order an appraisal unless they are confident the borrower is going to get approved and closed
- Paying for appraisal and the appraisal turns out fine is a good sign the loan process is going fine
- Buying new furniture prior to closing the loan is one of the biggest reasons for a mortgage denial
- Quitting a job and getting a new job is another reason for a last-minute loan denial
- Buying a new car
- Spending more money than usual
- Irregular and large deposits
- Overdrafts in bank accounts
Once the appraised value comes right on target with the real estate sales contract and value of a home, the mortgage process is that much is closer to getting clear to close.
Clearing Conditions For Clear To Close
Satisfying all of the conditions that processor and/or mortgage underwriter asks:
- The loan officer orders the title and sets a date to close on a new home
- Borrowers call movers to schedule a move-in date.
- Homebuyers notify the school where children attend
- Give them notice that they will be transferring children to a new school
- Register children to a local school district
- Many home buyers decide to purchase a new car from the local dealership since they have 0% financing
- THE MORTGAGE LOAN ALL OF A SUDDEN BLOWS UP
- THE LOAN OFFICER TELLS YOU THE LENDER RESCINDED
Can that happen?
- Buying that new car killed the deal
- By purchasing that new car, the debt to income ratio might have exceeded the maximum allowed by the lender
- Borrowers need to understand that a $500 dollar a month car payment would be equivalent to about $100,000 mortgage payment
- Cases like this happen all the time
- The debt to income ratio exceeded the lender’s maximum limit
- Borrowers can bet they will be not closing on their new home
Avoiding Stress and Delays in Home Loan Closings
The mortgage process up to the clear to close:
- Be current with their monthly payments
- Do not be late and send in monthly payments early
One 30-day late payment can drop credit scores by more than 50 points:
- This can disqualify borrowers from closing their mortgage
This applies to both purchase mortgages and refinances mortgages:
- Do not purchase any high ticket items
- This is common for new home buyers where they go shopping for furniture and appliances and max out their credit cards
- Borrower’s credit scores will drop and monthly payments will go up, thus raising debt to income ratio
- This can possibly disqualify from home loan closings
- Do not make any overdrafts or bounce a check
- A bounced check can cause mortgage loan denial
- The amount of the overdraft is insignificant
- Bounced checks and overdrafts equal financial irresponsibility and NO MORTGAGE
Monitor checking and savings accounts during the mortgage process.
Irregular and Large Deposits in Bank Accounts
Do not withdraw any large amounts of cash or deposit a large chunk of undocumented cash:
- This will delay new home loan or cause loan denial
- The mortgage underwriter will want to see a letter of explanation of the abnormal withdrawal and source of deposit
- Borrowers do not want to get in a situation where they need to explain their activities after loan approval
- Mortgage processor gathers all conditions
- Processor submits all conditions to the underwriter for a clear to close
- Any additional new conditions by the underwriter need to get provided
- The underwriter clears all conditions and CTCs the file
- Do not apply for new credit
- Letter of explanation on credit inquiries
Bottom line is that borrowers need to extremely careful about their spending habits and finances during the mortgage process. From the time borrowers submit their mortgage loan application until the home loan closings, they need to watch their finances, credit, and not purchase any large ticket items.