How to Avoid Delays in Mortgage Closings

This guide covers the reasons for delays in mortgage closings.  The pre-approval letter is the most important part of the mortgage application and approval process. The number one reason for delays in mortgage closings is because loan officers did not properly qualify borrowers before issuing the pre-approval letter. A pre-approval letter is a letter from a loan originator stating they have reviewed the loan applicant’s following documents:

• income
• credit
• credit payment history
• credit reports
• automated underwriting system findings
• public records
• assets
• liabilities
• and other applicable mortgage documents

In this article, we will discuss and cover the reasons for delays in mortgage closings.

Pre-Qualification Versus Pre-Approval

After reviewing the necessary docs, the loan officer can determine whether or not a borrower is pre-qualified. The difference between pre-qualification and pre-approval is that pre-approvals are loan commitments issued by mortgage underwriters. Homebuyers can shop with a pre-qualification letter

Buyers should not enter into a real estate purchase contract without a solid pre-approval letter that has been fully underwritten and signed of by a mortgage underwriter

A loan originator that does not carefully review the applicant’s loan application, credit, income, liabilities, and assets and issues a pre-approval letter can run into major problems during the loan application and approval process. It is imperative loan officers carefully review the applicant’s credit and income profile before issuing a pre-approval letter.  Get qualify for a mortgage, click here

Not Examining Docs Are Issues That Affect Pre-Approval

There are several things a mortgage loan originator should carefully examine before issuing a pre-approval letter. Just looking at the gross income borrower stated on the application and reviewing the liabilities on the credit report and examining the credit scores is not sufficient. If this is how a pre-approval letter is issued, there will be issues that affect pre-approval. Disaster can be right around the corner.

Documents Required By Loan Officers

An experienced loan originator should request the following:

• two years tax returns
• two years W-2s
• borrower’s most recent paycheck stubs to determine if any large unreimbursed expenses borrowers claimed
• Unreimbursed expenses on tax returns will offset monthly gross income
• Can greatly affect the borrower’s debt to income ratios
• There are cases where W2 wage earners have claimed more than 40% in unreimbursed expenses on their tax returns
• Often times mortgage loan originator just went off the paycheck stubs and verification of employment

The loan officer may not have examined the tax returns and the deal turned out to be a denial due to high debt to income ratios.

Issues That Can Affect Pre-Approval Letter: Reviewing Credit Report

A mortgage loan originator should carefully review the mortgage loan applicant’s credit report prior to issuing a pre-approval letter.

• Just looking at the credit score and meeting minimum credit scores does not do the job
• Borrowers should make sure there are no credit disputes on non-medical credit items that is greater than $1,000 in unpaid collection accounts
• Borrowers do not have to pay off old collection accounts to qualify for government and/or conventional loans
• However, cannot have credit disputes on non-medical items that have a total aggregate unpaid balance of $1.000 or greater

Any credit disputes with aggregate unpaid balances of $1,000 or greater will halt the mortgage approval process.

Credit Disputes During The Mortgage Process

Credit disputes need to be retracted in order for the mortgage process to proceed:

• Borrowers can have charged-off accounts and still qualify for government and conforming loans
• However, cannot have credit disputes on charge off accounts
• One major hurdle with retracting credit disputes is that it will lower consumer credit scores once credit disputes are retracted
• Borrowers who qualify with the credit scores they have may no longer qualify once they get their credit disputes retracted
• This is a very important factor to review and correct it prior to the issuance of a pre-approval letter.

Medical collections are exempt and borrowers can have credit disputes on medical collection accounts with balances. Zero balance credit disputes on non-medical credit items are alright. Borrowers do not have to have those retracted either.

Homebuyers looking for a solid pre-approval letter, please contact us at GCA Forums Mortgage Group at 800-900-8569 or text us for a faster response. Borrowers can also email us at gcho@gustancho.com. The team at GCA Forums Mortgage Group is available 7 days a week, evenings, weekends, and holidays included answering any of your questions and issue pre-approval letters.  Click Here To Apply For Mortgage process

This BLOG on delays in mortgage closings was UPDATED on November 12th, 2024.

Frequently Asked Questions on How to Avoid Delays in Mortgage Closings

These quick tips on how to prevent the common issues of mortgage closing delays will help clarify several questions many have:

What Contributes to the Delays in Mortgage Closings?

Answer: There are several causes, including delays in contact between the borrower and the lender, missing documentation, changes in the borrower’s financial status, appraisal processes, or title claims. Most of these can be significantly dealt with by being adequately prepared and ready to respond on time.

How Do I Ensure All the Boxes Are Ticked For the Timely Submission of Required Documents?

Answer: Pay stubs, tax returns, and bank statements are common documents needed to apply for a mortgage. These can be put together using a checklist in the early stages to ensure timely and effortless submissions. Once the documents are submitted, keep digital copies safe for easy use if further proof is required.

When I Make a Large Deposit or Withdrawal From My Bank Close to the Closing Date, Does That Create Delays?

Answer: Most likely, yes. Most underwriters only like it when large deposits that have been explained are made, as this implicates additional paperwork. It is best to refrain from carrying out any questionable transactions if they do not need to clarify anything during the mortgage application. Otherwise, explanations may be required.

Are There Specific Actions That Can Help Avoid Delays in Mortgage Closings?

Answer: It is best not to open new credit accounts, change jobs, or make large expenditures. The lender might have to review the new changes thoroughly, which might lengthen the closing period.

If the Closing Date is Near, Why Do Appraisals Still Hold Significance?

Answer: Appraisals are necessary because the lender wants to ensure that the amount being issued is equivalent to the valuation of the asset. Appraisal issues, timing issues, and even how the property is viewed and valued compared to the amount it was loaned can all be reasons for a delay. Thus, collaborating with the lender to set an early appraisal is required to sidestep any delays.

How Would One Avoid Any Unforeseen Delays in Mortgage Closings Caused by the Title Search?

Answer: Inquire the title company to initiate the search immediately. Boundary disputes, pending taxes, and liens are just operating extendable issues. Therefore, having a well-versed title company can help fix the issues promptly, speeding up the process.

How Frequently Should There Be Communication Between the Lender and The Concerned Individual?

Answer: Timely interaction with your lender helps you deal effectively. Always provide the correct information on events that may include, but are not limited to, changes in one’s family or business that might change the scope of the loan.

There Are Some Unexpected Time Delays; What Should I Do?

In case of time delays, do not hesitate to communicate with your lender and any other involved parties (such as the title company and realtor). Keeping contact with everyone involved in the deal is crucial when you know the exact reason for the delay and the documents/actions that will help to address it.

What Role Does My Real Estate Agent Play in Cutting Delays in Mortgage Closings?

A skillful realtor does not only assist you with paperwork; they are responsible for ensuring that all parties work in coordination, problems are solved in constant communication, and all deadlines are followed if not met. In addition, they may facilitate buyer, seller, and lender communication.

Are Delays in Mortgage Closings Affected by Rate Locks?

An extended delay would breach your rate lock, requiring you to assess your mortgage rates, which might lead to increased rates or even extra fees. Ensure that your lender extends the lock if delays look realistic and never breach the lock.

In this way, you will always be alert, and it helps streamline the house-buying process and avoid the routine reasons that result in time delays during mortgage loan closing periods.

Click Here To Connect with Our Loan Officers For Your Enquiry