Things To Avoid During Mortgage Approval Process To Close On Time

This BLOG On Things To Avoid During Mortgage Approval Process To Close On Time Was UPDATED On September 30th, 2017

When mortgage loan borrowers are seeking a purchase mortgage loan or a refinance mortgage loan, the loan officer will initially review a borrower’s full mortgage loan application and credit scores.

Other documents will be required and reviewed such as the following:

  • Two years tax returns, W2’s
  • Recent paycheck stubs
  • Two months bank statements
  • Other documents required to process mortgage loan

The loan officer will then analyze it and see if the borrower meets all of the loan program guidelines as well as their lender overlays.

  • The loan officer will decide whether there is a deal or not.
  • In most cases, the loan officer will be able to predict whether or not the mortgage applicant will be able to get a mortgage approval.
  • If the loan officer is confident that the borrower meets all of the lending requirements, the loan officer will submit submit the signed mortgage application and loan package for processing and underwriting.

Conditional Loan Approval

Once the underwriting department has reviewed the whole mortgage loan application, it will get submitted to underwriting. If borrowers meets all guidelines and requirements, they should get a conditional mortgage approval.

  • Getting a mortgage approval does not guarantee borrowers that the mortgage loan will get a clear to close, funded, and closed. 
  • Staying approved until the mortgage loan closes is what is important. 
  • Until mortgage loan closes, the mortgage lender can always revoke the approval in the event if there are changes in the borrower’s financial and credit profiles.

Mortgage And Closing Delays Can Always Happen

Most mortgage approvals take no more than 48 hours upon being processed and submitted to underwriting.  Conditions can take up to a week or more.

  • Most mortgage loan closings can be done within 30 days upon the mortgage loan borrower submitting their signed mortgage application and required documents needed to begin processing. 
  • However, closings can be delayed, not because of the buyer, but because the subject property might be a foreclosure, short sale, estate sale, or HUD/FANNIE MAE property. 
  • There are cases where closing delays can push 90 or more days. 
  • Once a mortgage loan borrower has gotten a mortgage approval, they need to stay approved and no hiccups can happen, otherwise that mortgage approval can be a denial.

Unexpected Circumstances During Mortgage Approval Process

Any unexpected changes in you financial and credit profile or personal life can affect the mortgage approval.

  • A job loss, for example, will probably be cause for a mortgage denial since borrowers no longer have the supporting income. 
  • Sickness and medical issues are beyond borrowers control. 
  • But in the event if borrowers take time off work due to an illness or sickness, this can possibly affect their mortgage approval. 
  • Mortgage loan underwriters do not look at personal problems. 
  • They are just concerned about facts and numbers.

Things That Can Revoke Mortgage Approval

Just because got a conditional mortgage approval, do not assume everything is okay and that the mortgage loan will close on time.

  • There are things to avoid during mortgage approval process and certain things can revoke conditional mortgage approval.

Do Not Purchase New Vehicle During Mortgage Approval Process

First and foremost, please do not purchase a new vehicle or trade up vehicle where it will increase monthly automobile payment.

  • Do not quit job during the mortgage approval process or take on another better job offer because this will definitely cause a delay on closing. 
  • If borrowers quit their job and take on another job, they need to supply 30 days paycheck stub and need a verification of employment from their new employer in order to close on mortgage loan.

Do Not Change Jobs During Mortgage Approval Process

Changing a W2 job to a commission job will cause a mortgage denial in a heart beat.

  • Do not close out current bank accounts and open new bank accounts.
  • Do not transfer large amounts of money from one account to another account. 
  • This will cause a paper trail nightmare for the loan officer, processor, and underwriter and will definitely cause aggravations and delays on the mortgage loan closing. 
  • Do not have any late payments. 
  • One late payment will drop credit scores by 80 or more points.
  • This will definitely be grounds for a mortgage loan denial. 
  • Do not dispute any credit derogatories even though the credit reporting agencies made a mistake. 
  • Borrowers cannot have a credit dispute during the mortgage approval process.

Do Not Apply New Credit During Mortgage Approval Process

Things To Avoid During Mortgage Approval Process is avoiding applying for new credit. Other causes for mortgage denials include applying for new credit.  Do not, under any circumstances, apply for new credit, especially credit cards.

  • Each hard credit inquiry will drop credit scores by 5 points or more and borrowers will need a letter of explanation for why they are applying for new credit. 
  • Many homeowners are so antsy in moving into their new home that they often apply for credit at furniture shops and other retail stores where they offer no interest on credit for up to a year. 
  • A large purchase can often times bump the borrower over the required debt to income ratio and will kill the mortgage approval. 
  • Do not accept any gift funds unless borrowers have talked to their  loan officer and have supplied the proper documentation and gift letters.

Avoiding Irregular And Large Deposits Are Things To Avoid During Mortgage Approval Process

Things To Avoid During Mortgage Approval Process is depositing large amounts of undocumented cash to bank accounts. Do not deposit or withdrawal any amounts of over $200.00 to any bank accounts unless it is documented and sourced.

  • Do not co-sign for anyone under any circumstances until borrowers close on mortgage loan. 
  • Borrowers who are not sure of anything regarding their financial and credit matters, please call their loan officer before taking any action. 
  • There are no such things as a common sense thing in the mortgage business.
Gustan Cho NMLS ID # 873293

Related> Changes In Credit Report During Mortgage Approval Process

Related> Things That Will Halt The Mortgage Approval Process

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

Comments are closed.