When you’re buying a home the last thing you want is to get to the finish line only to have something delay or derail your mortgage. Find out the most common reasons mortgage loans don’t close.
Establishing a strong relationship with your mortgage lender is a good way to make sure you’re on the right track through the life of your loan. That way you can express questions/concerns with your lender and eliminate problems before they even start. Let’s look at the top six reasons why many home mortgage loans don’t close and how you can avoid making one of these mistakes.
6 Things that Delay or Derail Mortgage Loans
Don’t have enough money for closing costs
It’s imperative that you talk with your lender and realtor about the estimated closing costs well before you sign for your home. This way you can prepare a sum of money that you are strictly using toward your down payment. By having a good estimate early on in the loan process, you will set yourself up for success and can avoid the stress that comes with having to find a large amount of cash at the last minute.
Knowing how much you need for a down payment is one of the most common worries of home buyers! Contact us to find out how much you may need to have on hand to meet your financial goals when buying a home.
Home inspection reveals repairs sellers won’t fix
The rule of thumb is to schedule a home inspection every 5 years, and especially after the first year in the home if it’s new construction. You don’t want to wait 10 years without a home inspection and then try to sell your home. Another way to avoid the costly fixes is to keep up with home maintenance every season. For example, it’s good to change your air filter every 6 months, and drain your water heater every year. By keeping up with these simple maintenance tasks, you are much less likely to run across a costly fix having to do with expensive parts of the home.
Loan documentation not provided, or not provided in a timely manner
By turning in paperwork on time, you’re able to ask questions if they arise, and your lender can express any incorrect paperwork to you before it’s too late. For example, if your lender sends you a gift money document, it’s important that you reply within 24 hours, so they aren’t waiting to send it in. A lot of paper work needs to be signed by multiple parties, so by holding it up on your end, you’re slowing down the signing process.
Credit score gets worse prior to closing on the loan
A good rule of thumb is to avoid opening any new lines of credit before your loan closes. Hold off on buying the expensive appliances, mattresses, cars, and jewelry that you would need to put on a credit card, until you’ve signed the closing paperwork. The last thing you want is for your loan to be denied because you opened a retail credit card. If you have to open a line, talk to your lender before you do. They can advise if it will significantly affect your loan status.
Loss of job
Mortgage loans often hinge on the buyer’s income from a job. Try your hardest to avoid leaving a job before your loan closes. To a bank, it may appear that you’re now unable to be able to pay your monthly mortgage payments, since you don’t have a steady source of income. It’s also a good idea to leave out expected bonuses when calculating steady income. That way if you don’t receive the bonus, your income doesn’t drop significantly, flagging your loan processor.
Borrower makes mistakes caused by confusion about steps in loan process
The best way to avoid confusion is to establish a strong relationship with your lender and realtor so you feel comfortable expressing confusion. Make sure you understand the timeline of the documents you need to submit, and understand what forms of documents qualify. If something significant happens in your life that would affect your loan, talk to your lender right away so they can advise you on the proper steps to take to ensure your loan continues on the path to approval.
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