Home Loan Closings
This Blog On Home Loan Closings Was Updated On April 08, 2017
Home Loan Closings is the finish line where all borrowers want to get to. A home loan approval is not a guarantee that borrowers will close on their loan but a great indication that it will. Mortgage borrowers work hard in getting a conditional loan approval by going through the following mortgage steps and end up that they get a last minute mortgage loan denial by their lender.
Here is a case scenario of a last minute mortgage loan denial
- Signing the mortgage loan application and getting their credit pulled
- Providing tax returns, W-2s, paycheck stubs, bank statements, and other documents.
- Paying for appraisal and the appraisal turns out fine and is right on target with the sales real estate contract and value of home
- Satisfying all of the conditions that processor and/or mortgage underwriter asks.
- Loan officer orders title and sets a date to close on new home.
- Borrowers call movers to schedule move in date.
- Home buyers notify the school where children attend and give them notice that they will be transferring children to a new school.
- Register children to local school district where the new home is.
- Many home buyers decide to purchase a new car from the local dealership since they have 0% financing.
- THE MORTGAGE LOAN ALL OF SUDDEN BLOWS UP AND LOAN OFFICER TELLS YOU THE LENDER RESCINDED
Can that happen? Absolutely! 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 happens all the time. Debt to income ratio exceeded the lender’s maximum limit, borrowers can bet that you will be not closing on your new home.
Avoiding Stress And Delays In Home Loan Closings
When a borrower gets approved for a mortgage, they need to do the following:
- 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 and disqualify borrowers from closing their mortgage loan.
- This applies to both purchase mortgages and refinance 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.
- It does not matter even it is a $1.00 bounced check. Bounced checks and overdrafts equals NO MORTGAGE.
- 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.
- 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.
- Once conditions on a conditional loan approval has been met, the processor submits the file for a clear to close.
- Do not apply for new credit.
- Credit inquiries will need to be explained to the lender.
Bottom line is that borrowers need to extremely careful on 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.