This guide covers how to avoid delays in home loan closings. Most mortgage loans can close in 30 days or less. However, some mortgage loan closings can get delayed for several reasons. There should be no reasons for delays in home loan closings, says Dustin Dumetre, a senior loan officer at Gustan Cho Associates:
The only reason for delays in home loan closings is because the loan officer did not properly quaify borrowers or because the mortgage processor submits incomplete mortgage documents to the mortgage underwriter. Incomplete documents submissions to underwriting gets conditioned by the mortgage underwriter which adds delays to home loan closings.
Nobody likes delays in home loan closings, whether you are a purchaser or a refinance borrower. The key to avoiding delays in closings is to complete mortgage applications as accurately as possible and provide lenders with all the documents they request. This article will discuss delays in closings and ways to close on time.
Mortgage Documents Required
Every bit of information on your mortgage application will be verified. If mortgage applicants state that they have $50,000 in assets, assets must be verified by providing bank statements, investment accounts, 401k, or other documents. Assets that cannot be verified cannot be used and cause delays in home loan closings. We need to provide all pages of bank statements and asset documents, including blank pages.
What Borrowers SHOULDN’T Do During Mortgage Process
Please do not apply for new credit during your mortgage loan application process. Credit inquiries will cause delays in mortgage loan closings. This is because underwriters will request a letter of explanation on why they are applying for new credit. Credit Inquiries are normally hard hit on a credit report. Credit scores drop with hard inquiries. Too many credit inquiries will alert creditors and lenders and are viewed as negatives. The mortgage loan underwriter will ask for an explanation from the borrower to explain why the borrower has applied for credit and would want a written explanation of the outcome. This, too, can cause delays in closing.
Recent Late Payments Can Be Delays In Home Loan Closings
Never be late on a monthly payment, whether a credit card or installment loan payment. Being late on a payment will drop credit scores. Will cause delays in home loan closings. Late monthly payments can disqualify pending mortgage loans altogether if there is no good reason for being late.
Reasons For Delays In Home Loan Closings
Other Delays In Closings include if the home appraisal is lower than anticipated. When the home appraises lower than the purchase price, the borrower’s loan officer can contest the appraisal. This will cause delays in home loan closings. Contesting an appraisal will probably cause the longest delay. Contesting an appraisal can cause delays in home loan closings for more than two weeks. Large deposits or large bank account withdrawals will cause delays in home loan closings.
Any out-of-the-ordinary deposits or withdrawals greater than $200.00 need to be sourced and explained to underwriters. From the time applies for the mortgage loan to the time the home loan closes, borrowers should be extremely careful not to be late on monthly payments.
They should not open new credit and not make any large purchases. They cannot purchase high-ticket items, monitor their bank accounts, and religiously pay their monthly debt obligations on time. Many borrowers get excited about buying a new home when they get new furniture and credit cards. They often charge up high ticket items like furniture, lawn equipment, and other furnishings for their new home. This causes their new mortgage loan to be in jeopardy due to higher debt-to-income ratios.
Mortgage Closing Delays are sometimes unavoidable but there are things that can be done to avoid mortgage closing delays. The first step mortgage applicants do when they apply for a mortgage is complete a mortgage application.
The official mortgage loan application is also called 1003. It is a 4-page application and it will ask borrower’s income, asset, debt, and liability information. One of the simplest things in avoiding mortgage closing delays is to complete the mortgage application as accurately and as detailed as possible. Every line item on the mortgage application will be verified by the mortgage underwriter. If there are any discrepancies, the mortgage underwriter will ask for a detailed letter of explanation. Letters of explanations at the last minute are one of the major causes of mortgage closing delays.
Provide Requested Docs First Time Around
There are over a dozen line items that mortgage loan originators will request by borrowers. There are multiple important documents required by the lender that will be requested from mortgage loan applicants. Make sure to provide complete documents and all pages. Even if the pages are blank, include the blank pages. Borrowers with a prior bankruptcy, foreclosure, deed in lieu of foreclosure, a short sale will be asked to provide for paperwork including blank pages. Borrowers with prior divorce and/or child support need to provide documentation.
Other Documents Required To Process Loan
Lenders will require a list of documents from borrowers. One of the biggest reasons for mortgage closing delays is submitting files to mortgage underwriters that are not complete. If a mortgage underwriter sees incomplete files, they will suspend the file and kick it back to the mortgage processor. This will delay the underwriting process.
Here are the important documents that are required:
- Two months of bank statements.
- Both checking and savings bank statements. ‘
- Mortgage loan applicants who do not have current bank statements, get a transaction state from a bank teller and get it dated, signed, and/or stamped
- Borrowers who submitted transaction statements that have not been signed, dated, and/or stamped, it will get kicked back and will cause mortgage closing delays
- Two years of tax returns and W-2s for salaried or hourly workers
Avoiding Mortgage Closing Delays For Self-Employed Borrowers
A self-employed borrower needs to provide the following:
- two years tax returns
- year to date profit and loss statements
- current balance sheet for self-employed borrowers
Page 2 of the tax returns must be signed by the customer and tax preparer if prepared by an accountant:
- All pages of tax returns are required even blank pages
- Failure to submit blank pages will cause mortgage closing delays
- We will need the Mortgage, Note, and/or Riders for an existing mortgage on property owned by borrowers
- All pages are required even blank pages
- The two most recent paycheck stubs covering 30 days
- Copy of homeowners insurance, especially the declaration page and name, address, phone, email address of insurance agent
- Divorce decree if divorced and alimony agreement and child support documents if applicable
- Make sure you include all blank pages
- 401k, profit sharing statements, and/or pension fund statements
- Again, make sure to include all blank statements
- Stock, bond, and securities statements
- Driver’s license and social security copies to satisfy the Patriot Act requirement
- Copies of real estate purchase contract along with all addendum and riders
- If it is a condominium, include the contact of the association
- Copy of social security and pension award letter if applicable
- Mortgage Applicants who rent and can provide rental verification need to provide proof of 12 months worth of canceled checks
If rent is paid online from a bank account, we need 12 months of bank statements showing rental payments.
Avoiding Mortgage Closing Delays
There is no reason why borrowers should get a last-minute mortgage loan denial or closings should be delayed.
The only reason for mortgage denials or stress in the mortgage process is because the borrower was not properly qualified. Other delays in the mortgage process is due to mortgage documents were not properly processed.
Here are ways of avoiding delays in mortgage closings:
- Loan Officer should make sure there are no credit disputes
- Credit Disputes in the mortgage process is not allowed with the exception of medical disputes and non-medical disputes with zero balance
- Non-Medical disputes with under $1,000 in outstanding balances are exempt from credit disputes
- Make sure that borrowers do not have any public records outstanding that are not reporting on the credit report
- Lenders will do a third party national public records search so any public records like judgments, tax liens, bankruptcies, foreclosures, short sales, deed in lieu of foreclosure will get discovered
- Credit Repair companies can often delete public records off credit reports
- Deleting late payments, charge offs, collection accounts are not public records so there is no way of lenders and/or creditors finding out about them, but public records will get discovered
- Make sure that foreclosures, deed in lieu of foreclosure, short sale dates are properly disclosed
By supplying the requested documents as complete as possible the first time around, borrowers will avoid mortgage closing delays.
