21 Jul Six Ways to Ensure Your Home Mortgage will NOT Close on Time
Got your attention? Want a lender to delay or even cancel your mortgage closing? Then change your “borrower circumstances” between the day you apply for and the day you close on your home loan. Keep reading so that your loan closes on time and without any added stress.
Fannie Mae’s Loan Quality Initiative, which went into effect in 2010, requires lenders to track “changes in borrower circumstances” between application and closing. Therefore, for borrowers, the Fannie Mae rules mean certain actions are likely to delay or otherwise mess up a mortgage closing.
It can take between 30 and 45 days to close on a mortgage and complete a home purchase. During this time there will be home inspections, additional needed documentation, and home appraisals. Although you might be excited preparing for the move it is important to remember the sale is not a done deal until after the closing and you have a set of keys in your hand. These mistakes below could delay or even cancel the loan at the last minute. Do not let this happen to you.
Opening a new line of credit –
When you apply for a mortgage, the lender will check your credit report and review your current debts and monthly payments. Even with good credit, owing a lot of consumer debt will affect your qualifying amount.
Mortgage payments should be no more than 28% of a borrower’s monthly gross income, and their total minimum debt payments—including the mortgage—should be no more than 36% to 43% of their gross monthly income, depending on the type of loan.
Some homebuyers make the mistake of applying for new lines of credit and increasing their debt prior to closing on a mortgage, not realizing how this action jeopardizes the mortgage and home purchase. Mortgage lenders recheck credit reports about two to three days before closing. If your credit report reveals a new line of credit or higher debt, the lender has to reevaluate your financial state to see if you still qualify for the mortgage.
To avoid these types of issues, do not take out any credit or finance anything until after the closing. This includes financing furniture for your new home, buying a car, applying for a store card, and increasing your limit on your current credit cards. Just wait until after you have those keys!
Changing Jobs –
Getting a mortgage requires two years of consecutive employment. Mortgage lenders verify employment and income in the beginning of the process, and again once the closing date approaches. If you quit or change your job before closing your mortgage lender could cancel the loan.
Although some situations are beyond your control, like getting laid off from work. The lender may allow the loan if you find work with similar income however you will need at least 30 days of paycheck stubs before closing which will delay the purchase.
Spending too much money or charging up your current credit cards –
You may think it’s okay to begin shopping for your new home as long as your using cash and not credit. But it’s also important that you do not spend large sums of money until after closing.
Mortgage lenders will check your bank statements during the approval process to make sure they have enough in reserves for their closing costs and down payment. In some cases, lenders request updated bank statements prior to closing.
If you go on a shopping spree prior to closing and spend a large sum of money, you run the risk of not having enough in savings to complete the home purchase. Banks provide borrowers with an estimate of their mortgage costs in the early stage of the buying process. But oftentimes, actual funds needed to close on a house are higher than the estimate. If you don’t have sufficient cash, this can delay or jeopardize the home purchase.
Inability to sell your current home –
If you are also selling a home, your new mortgage may be contingent on the sale of the current home. This is often the case when a borrower can’t afford two mortgage payments. The lender will do everything correct to ensure there are not problems with your new mortgage, however the individual buying your house could run into issues with their lender.
Low home appraisal –
Your new mortgage is contingent on a satisfactory home appraisal. The lender sends a home appraiser to evaluate the home’s value based on the property’s condition and comparable sales in the area. If the appraised value is lower than the agreed upon sales price, you and the seller will have to renegotiate the price. This can be an easy process or a difficult one. A motivated seller will likely lower the asking price to match the appraised value and continue with the sale. But if a seller is unable or unwilling to lower the asking price, you will have to put down a larger down payment or walk away from the property.
Title related issues –
Another popular reason why a real estate closing can be delayed relates to the title of the piece of real estate. One of the most important reasons why it’s suggested both a buyer and seller hire an attorney is because they will help ensure “clean title” is being transferred.
It can be extremely frustrating for a buyer who is attempting to sell a home in the future only to find out there were previous liens against their home that were not discovered when they purchased the home. A home without clean title is virtually unsalable.
There are certain title related problems which actually arise frequently. Most of the common title related problems can be solved, but take significant time and will likely delay the closing or possibly cancelled.
If you’re selling your home, one way to help reduce the risk that your real estate closing is not delayed is to advise your attorney to perform the title search once you’ve received a purchase offer. Many sellers attorneys will wait until a buyer receives their mortgage commitment, however, waiting for the buyers mortgage commitment can cause delays in the future. A title search is going to be performed in almost every situation, so even if a buyer gets declined for their mortgage, at least the title search is already completed and will not hold up a future transaction.
Again, the experts at Anchor Mortgage will help ensure you will close on time. If you have a question about the article above or would like more information on how to ensure your loan closes on time do not hesitate to contact Dante Campanelli at Dante@anchormortgagellc.com or at 843-367-9900.
Do you have any other reasons why a closing can be delayed? If so comment below.