RISKS WHEN SCHEDULING A CLOSING DATE

Hello everyone!  It's been a while since I blogged. 

Today I want to talk about scheduling closings.  If you are a seller, or the agent for a seller, scheduling a closing is not fun.  As long as you are aware there is a good possibility the closing could be delayed you'll be OK.  I've been in Real Estate and Lending for over 33 years.  In the "old days" you didn't even schedule a closing until the lender called and said we're ready to go.  This would be the way to go, except people do like to plan on a closing date.  There are just so many things these days that come up and delay closings.

Reasons for delays:  Loan Volume.  With the economy the way it is, lenders are not hiring new staff to keep up with the refinance volume.  They don't want to ramp-up staff only to lay them off if it slows down.  Rates are about the best they've been EVER!  Someone purchasing a home is a bit of a priority, because when you refinance, you already live there.  But refinances can't be shoved to the bottom of the pile all the time.  When you lock into an interest rate, you only have a certain amount of time to get the loan closed or that rate could be lost.  Some lenders are taking 90 days or more to get a  refinance loan closed. 

Another delay could be what was presented at time of application varies from what a lender verified.  Income could be less, debts could be more, assets may not be enough, there could be miscellaneous deposits, or NSF's on bank statements.

Income:  These days, STABLE income is essential.  Over-time, bonus, and commissions need a consistent 2 year history.  If 2009 was less than 2008 and year-to-date is less, you won't be using this income to qualify.  Anything "decreasing" is not good.  If someone says they work 40 hours a week, but the recent pay stubs show less than 40 and the year-to-date income doesn't support 40 hours a week, you'll have problems.

Job history:  If someone doesn't have a 2 year work history this could cause problems.

Cash to close:  Lenders used to get a verification of deposit.  If it showed a two-month average balance consistent with the current balance, it was all good.  Now it's a requirement to look at the last 2 months of bank statements.  On these statements you look for NSF's.  More than one NSF or so and it could cause a denial.  Consistent NSF's are considered bad credit.  Deposits other than payroll could cause problems.  Any deposits should be documented and the source of the deposits provided.  Lenders are looking for "loans" that may not show up on the credit report when there are "unsubstantiated deposits" in an account.

Credit reports:  If there are accounts that are "disputed" it may cause a loan denial.  Disputed accounts are not calculated in credit scores, so if the disputed account would turn out to be accurate, the credit score may be less and the loan could be denied.  Borrowers should get loans out of dispute before the apply for a mortgage. 

Credit inquiries:  Any inquiries on a credit report could delay a loan closing.  A credit report is only good for a certain amount of time.  If a borrower is getting pre-approved, and they find a house and plan on closing and it's been 5 months, we need a new credit report.  If they've applied for new credit since the initial report was pulled, the pre-approval may not be any good if new debts show up.  If you're thinking of applying for a mortgage, DO NOT APPLY FOR NEW CREDIT!  No % off store purchase if you apply for a card (happens a lot during holiday shopping).  No buying appliances for your intended home purchase before you close on 90-day same as cash.  If a credit report update is needed right before closing, this could cause a delay while the new debt is verified and could even cause a denial if another debt puts you over the allowable ratios.

These are just a few thoughts I had today.  If you have any mortgage questions, just give me a shout and I'll try and help.

Happy Thanks Giving!

The opinions expressed here are the views of "Jolyn the Mortgage Expert" and do not necessarily reflect the views and opinions of Guaranty Bank.