How To Close Home Loan On Time And Avoid Mortgage Denial

This Article Is About How To Close Home Loan On Time And Avoid Mortgage Denial

Closing a home loan on time is everyone’s goal, especially if it is a home purchase loan. A last-minute mortgage loan denial is any home buyer’s nightmare. Delays in closing add countless stress for any borrower. There is no reason why a home loan should not close on time. There are tips on how to close a home loan on time. It can be done if all parties, from the home buyers’ side to the sellers’ side, all cooperate and work as a team. Teamwork is key to how to close a home loan on time. The home buyer can do everything possible that is requested by their lender. There are issues that can delay a home closing if the seller’s side does not cooperate or loan officers do not properly qualify borrowers.

Importance Of Complete Documents Prior To Starting The Mortgage Process

Certain things where we need the seller’s cooperation such as the following:

  • getting access to the subject property for home inspections
  • home appraisals
  • re-appraisals
  • making sure that the title is ordered
  • glitches with title work
  • or in the event, if there is something wrong with the property where it does not pass appraisal inspection and the home seller needs to correct certain items for an appraisal re-inspection

Providing Complete Documents Is Key On How To Close Loan On Time

The mortgage processing stage is the most important stage. Mortgage processors are in charge of making sure that all documents provided by the applicant are complete. Processors need to make sure there are no missing pages on the documents provided. For example, lenders require 60 days of bank statements from all borrowers which include blank pages. The reason being, each page of the bank statement states as follows: Page 1 Of 1, Page 2 Of 2, Page 3 Of 3, etc.  Sometimes there are blank pages where it may state Page 5 Of 5 and that page 5 may be blank and many borrowers may just omit to submit the blank page. When a mortgage underwriter notices that the blank page is missing, this will put the whole file on hold. Situations like these can be one of the many reasons why there are closing delays.

Proof Of Income During Mortgage Process

Lenders will need to verify the borrower’s income besides reviewing two years of tax returns, two years W-2s, two years 1099s, and most recent paycheck stubs. Borrowers will need to provide the contact information of all employers they worked for in the past two years.

Contact information should include the following:

  • name of the company
  • address of company
  • position held
  • wage information
  • phone number of company
  • contact person and contact number of supervisor and human resources manager
  • start date
  • termination date

Qualified Income: Verification Of Employment

What is proof of income during the mortgage process

Lenders will do a written verification of employment on all employers the borrower worked for in the past two years:

  • If a borrower has non-traditional income such as the following:
  • social security income
  • disability income
  • pension income
  • dividend income from investments
  • child support income
  • alimony income
  • bonus income
  • part-time income
  • overtime income
  • investment property rental income
  • With the above types of income, borrowers need to provide documentation related to the source of income and all necessary paperwork

This is so the mortgage underwriter can prove and verify the income so they can use it to calculate the borrower’s debt to income ratios.

Working On Homeowners Insurance Is Way On How To Close Home Loan On Time

One of the reasons why there are delays in home loan closings is because home buyers wait until the last minute to get homeowners insurance. Borrowers with higher debt-to-income ratios can run into problems if the homeowner’s insurance premium is higher than initially anticipated. This is where the higher homeowners insurance premium can disqualify them for the home loan due to going over the maximum debt to income ratios permitted. The day borrowers submit their mortgage applications and mortgage documents, they should start shopping for homeowners insurance. Borrowers try to get homeowners’ insurance quotes and declaration page as soon as possible instead of waiting to do this task at the last minute.

Providing Asset Documentation

Providing proper asset documentation without any missing items during the mortgage processing stage is how to close the home loan on time. Lenders want to see home buyers have enough seasoned funds to close on their home loans. They need 60 days of bank statements. Bank statements need to have enough assets for the down payment.

Buyers without enough funds in the bank statement will need to provide other asset accounts or gifts from a family member. Other assets can be used for the down payment and closing costs such as 401k accounts, investment accounts, or other asset accounts where the down payment will come from. Bank statements will be carefully analyzed for irregular and large deposits. Any irregular or large deposits in your bank account will need to be sourced and mortgage underwriters will want to see where the money came from. Cash does not count. For borrowers with large amounts of cash, the only way to be able to use that cash for funds to close is to deposit it to their bank account and let it season for 60 days.

How To Close Home Loan On Time: Check Credit Profile For Accuracy And No Errors

How To Close Home Loan On Time And Avoid Mortgage Denial

The consumer credit report will be carefully reviewed. There cannot be any credit disputes on non-medical collection accounts with an aggregate unpaid collection balance of over $1,000. If the combination of all of credit collection accounts is greater than $1,000, borrowers need to have those credit disputes removed. The retraction of credit disputes will take time. This should be done prior to applying for the mortgage loan. Unfortunately, a mortgage loan originator should catch this prior to issuing home buyers a pre-approval letter. But in the event, if they do not, the credit dispute retraction needs to be done in order for the mortgage process to go forward.

Retracting credit disputes is one of the biggest reasons why there are mortgage loan closing delays Non-medical collection accounts with zero balances are exempt. Borrowers can have credit disputes with zero balance collection accounts. Cannot have credit disputes with charged-off accounts. Charge-off accounts do not count matter. Charge offs do not count with FHA Loans so if borrowers have charged-off accounts, please do not dispute them. Medical collections are exempt also and credit disputes with medical collection accounts are allowed.

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