If there’s one time in your life that you don’t want a surprise, it’s at your mortgage closing. An unexpected delay can cause issues with the seller and even leave you without a place to live if you’ve already sold your current home.
The loan closing is the end of the long process that your lender went through to ensure that you are a good risk. In order for this process to go as smoothly as possible, everyone needs to be on the same page. This includes you, the loan officer/underwriter, and the closing agent. If everyone isn’t on the same page, you may find your closing delayed a day, week, or even a month.
Follow these steps to make sure this doesn’t happen to you.
Problem: The Lender Isn’t Ready
Lenders may promise you that they can close your loan by a certain date, but you aren’t the only customer they are doing business with right now. They are only human and they can forget your deadline, putting your loan in the back of the line.
How do you prevent this? Stay in contact with your loan officer. Periodically call your loan officer to check in and see the status of your loan. If you have a financing contingency on your purchase contract, the lender will need to provide you with an approval sooner than the closing date, so it’s even more important for you to stay in touch with your lender.
Ask your lender if there’s anything they need from you or if they see any red flags that may hold up your closing process. This way you can plan ahead and sidestep any last minute issues.
Problem: You Don’t Have the Cash at the Closing
Even if you have plenty of assets to pay for the cost of closing on the home, it doesn’t mean the cash will be at the closing table when you need it. Many borrowers insist on wiring the funds to the lender, thinking this is the safest route and it may be, but what happens if there’s a hiccup in the system?
In order to avoid this, you can do one of two things:
- Ask the lender if a cashier’s check will suffice. If so, you don’t have to worry about technology, you can go to the bank yourself and get the cashiers check. This way you’ll have the money in hand when you go to the closing.
- Wire the funds early. If you have to wire the funds because that’s what the lender requires, set it up a few days early. This way if there are issues with the system, they can work themselves out and still get your money there on time.
Problem: The Closing Figures Don’t Match Your Expectations
It’s not unusual to get a Closing Disclosure only to find out that your bottom line is much higher than you anticipated. Now you have to go back to the lender and question every charge, line by line. If you can’t reach an agreement and you don’t have the extra cash to pay at the closing, you may get a delayed closing.
In order to avoid this from occurring to you, make sure you get your hands on the Closing Disclosure at least three business days before your closing. Your lender is required to provide it to you this early so that you can go over it and bring up any issues you have early on before the closing. Don’t wait until the last minute to look at this document. Instead, review it as soon as you can so that you can iron out any issues early and avoid a delayed closing.
Problem: Your Bank Statements Show a Large Deposit
Don’t assume that your lender won’t request additional bank statements once you are approved for the loan. They may want to double check to make sure you didn’t take out a loan to put money down on the home. If they request your bank statements and find a large deposit on there, it could be a red flag that delays your closing. The lender will need to evaluate the situation and determine where the deposit originated. This means more paperwork from you and more time in underwriting.
You can prevent this issue from occurring by avoiding any large deposits in your account. If you come across a windfall or sell an asset, keep the money at home or deposit it in a bank account that you aren’t using for your mortgage loan. This way you can avoid any red flags or delays in your closing.
Problem: Agreed Upon Repairs Remain Undone
If the seller agreed to conduct repairs on the home before the closing, you probably rely on the fact that they will follow through with their promise. What if they don’t, though? What if you go to the final walkthrough only to find the issues just as they were before you requested them to be fixed? You guessed it – your closing will be delayed.
So how do you prevent this? You make sure your realtor is following up with the seller’s agent to ensure that the home is being repaired. If the real estate agent can’t provide proof of the repairs, it’s time to consult with your attorneys to see what you should do. In some cases, the attorney may suggest that you delay the closing until the seller holds up his end of the bargain. In other cases, the attorney may negotiate a credit for you at the closing so that you can do the repairs. Note that this will only work if the home was able to pass the appraisal and the repairs were superficial or didn’t affect the home’s livability.
These common mistakes can delay your closing indefinitely. It’s important that you are diligent in your effort to stay in touch with everyone that is involved in the process. It’s not until you sign on the dotted line on your closing documents that anything is certain.