This Article On Avoiding Things That Will Delay Mortgage Closings
Homebuyers have a tentative closing date for their home closing on their home purchase contract. There are things that will delay mortgage closings that need to be avoided.
- The mortgage loan process normally takes 30 days from the day the mortgage loan borrower signs the mortgage loan application and submits all documents
Mortgage documents that need to be provided are the following:
- two years tax returns
- two years W-2s
- recent 30 days paycheck stubs
- 60 days bank statements
Other documents that may pertain to the individual mortgage loan borrower:
- if it applies to them such as divorce decree
- child support and/or alimony paperwork
- bankruptcy paperwork
- short sale paperwork
- prior foreclosure paperwork, etc
Any delays with submitting the property forms requested by loan originator and mortgage processor will cause delays in the underwriting mortgage loans. Delays could cause delays in processing and underwriting loan and could delay the closing. Besides not submitting the necessary paperwork, there are things that will delay mortgage closings.
Some Things That Will Delay Mortgage Closings
As mentioned in the earlier paragraph, there are some things that will delay mortgage closings. Every mortgage loan borrower should avoid these things that will delay mortgage closings.
- In some cases, mortgage loan may not close at all so need to be careful on actions to take during the mortgage application and approval process
- There are many cases where a home purchase can blow up just days before the scheduled closing date
Many times, things can be avoided and over the most minor things, closings can blow up.
Getting A True Valid Pre-Approval
Every mortgage company and loan originator has their own way of issuing a pre-approval.
- Some loan originators are laxer in issuing pre-approval letters than others
- Some loan officers just run credit and ask the borrower for information and just go off the information the borrower gives the loan officers
- They do not run the mortgage file through the Automated Underwriting System and issue pre-approval letters minutes upon talking to a loan applicant
- Other loan originators will run credit, will request income documents such as tax returns, W-2s, recent paycheck stubs, and will run the file through the Automated Underwriting System for an automated approval
- There are also some loan officers who will even go to the extent of getting verification of employment to make sure that overtime income, bonus income, part-time income is valid
- They take these extra steps so there will not be a blow-up during the mortgage application and approval process
Even if it may take a few days to get a solid pre-approval, it is best to get a loan originator who will review and examine credit and income profiles very carefully initially instead of a loan originator that will just issue a pre-approval half-assed.
Things That Will Delay Mortgage Closings Is Buying New Furniture With Credit
The first thing most homebuyers do after they get an accepted home purchase contract and have their mortgage loan application submitted is to go furniture shopping.
- Do not make any large ticket purchases and apply for new credit
- Many furniture and appliance companies offer no finance charges for 12 months or will offer special incentives
- Window shopping for furniture and appliances is fine
- But there are many aggressive furniture and appliance salespeople who can sell ice to Eskimos and may fall prey to that
- Every credit inquiry will lower credit scores by 2 to 5 points
- Even though there are no finance charges for 12 months, mortgage underwriters will use a monthly figure on new purchase to calculate debt to income ratios
- For example, if borrower purchased $10,000 of new furniture and payments are deferred for a year, the mortgage underwriter can take 5% of the balance on new furniture balance and tack that on as a new monthly payment
This will be a major issue for borrowers with already a higher debt to income ratio.
Things That Will Delay Mortgage Closings Is New Car Purchase
A car loan payment is normally $400 to $500.
- A $400 monthly payment is equivalent to a $70,000 mortgage loan balance
- Reason car payments are so high is because they are amortized over 4 to 6 years versus 30 years on home loans
- A car payment affects debt to income ratios
Never buy a new car or trade up to a bigger lease on a car during the loan application and approval process.
Things That Will Delay Mortgage Closings Is Changing Employment
Do not under any circumstances change from an hourly/salaried job to a commissioned job and/or 1099 job.
- Going from a W-2 Wage Earner to a 1099 Wage Earner will delay mortgage loan approval for two years
- There is a two year mandatory waiting period for those who change W-2 to 1099 employment
- Changing jobs from one salaried job to another salaried job will also cause a 30-day delay in mortgage closings
This because mortgage lenders need to do a verification of employment and require 30 days paycheck stubs from the new employer.
Things That Will Delay Mortgage Closings Are Overdrafts In Bank Statements
Mortgage underwriters will ask for updated bank statements until the day borrowers close on their home loan.
- Any overdrafts in the past 60 days can and often times than not can be mortgage loan denials
- Pay special attention to bank statements during the mortgage application and approval process
- Also, do not make large or irregular deposits on bank accounts
Every irregular and/or large deposits need to be sourced.
Do Not Be Late On Any Monthly Bill Payments
Mortgage lenders will do a final soft pull on credit prior to issuing a clear to close. Whether credit scores go higher or lower will not matter because they will just use the initial credit score that was submitted with the original mortgage loan application. However, they will question any late payments, new credit inquiries, and new credit on the credit report. Do not under any circumstances be late on any monthly payments and do not apply for any new credit during the mortgage application and mortgage approval process.