I could relate to both stories. Having helped thousands of home buyers finance a home for purchase, I have been involved with both experiences. Borrowing money to buy a home is not a simple process and is getting more complicated by the day. The rules for obtaining a mortgage are pretty standard among companies; however, the complication arises because no two customers have the same financial situation. This dynamic creates a lot of confusion among the professionals in the housing industry and frustrates and stresses out the home buyer looking to obtain financing.
In my experience, the home buyers who experience the greatest stress and frustration are those home buyers how do not have their "ducks in a row" when getting ready to buy a home. In other words, there is something about their financial situation that hasn't been addressed and has the potential to cause great duress while going through the mortgage process. I have provided a list of items that can derail a closing below for your information. IF you can identify one of these issues, then do yourself and your loan officer a favor. Do NOT go under contract until this item is resolved. You can work through the issues while looking for a home but once you are under contract, the ticker starts and you are legally binding so please make sure to have your ducks in a row before writing the sales contract. Here is the list:
- Errors or omissions in the initial loan application - It is critical that you be very detailed with loan officer when applying for the loan. If you are involved in a law suite, then you must disclose this on the application, If you own more than one property, this must be disclosed. If you pay child support or alimony, this must be disclosed. Your name must be spelled correctly. The social security number has to be correct as well as date of birth. The employment dates HAVE to be correct and MUST go back a consecutive two years. The application which you will sign needs to be 100% accurate. If you are looking over the application and something is missing or incorrect, then call the loan officer and let he/she know. Incorrect information on the residential loan application is one of the main reasons for a problematic closing. Everything on the loan application is verified through a third party and often times the verifications do not happen until later in the mortgage process. If the verification does not confirm the data on the loan application, then there is a potential the loan will not be approved. This is the reason is it so important to pay attention to this form. It is better for the inaccuracies to be addressed upfront rather than later in the process.
- Changing jobs during the process - If a new job becomes available during the mortgage process, then tell work with the prospective employer to work with you on a start date after you purchase a home. Changing jobs during the loan process will more than likely delay the closing transaction and may even cause the loan not to close so do your best to stay gainfully employed with the same employer during the loan application.
- Insufficient funds to close: - Before you go under contract on a home, you must have a plan for there the funds are coming from to close AND be able to show the funds in the account. If you are receiving an allowable gift from a relative, then the gift letter must be signed by you and the donor and the bank statement from the donor needs to be submitted.If the gift amount changes in the process, it can cause a delay, so please be specific on the amount of the gift and do your best to stick with the predetermined amount. Funds to close must be verified prior to writing a sales contract. It is not very fair to the seller to take the property off the market for someone who is saving funds to close while still in the process. Large deposits must be sourced and explained and cash deposits have to be overlooked. The earnest money funds must be verified as well.
- Late payments and cedit issues: It is not unusual for an erroneous payment to show up on a credit report. Erroneous credit can happen as a result of neglect, error or fraud. The issue with erroneous credit is that it can cause delays in the process and could possibly lead to a denial on the loan. If the loan officer tells you there is a bad debt on the credit report, then do your best to clear up the issue as quickly as possible. Have an honest, detailed conversation with the loan officer and find out what needs to be done. Sometimes, the erroneous credit is OK and nothing has to be done, but many times the issue needs to be addressed prior to going under contract. There are too many scenarios regarding credit to go over in this particular blog, but if there are any credit issues mentioned in the application process, then I urge you to be very proactive in addressing the issues and resolving them prior to writing a contract on a home.
- Undisclosed debt: - Do NOT and I repeat, DO NOT open any new credit while in the process of buying a home. New debt includes refrigerators, washer and dryers, car loans, furniture, store credit cards, just to name a few. Do NOT open and rental accounts either because renting is often reported on the credit report as well. Disclose all of your debt, even debt that is paid to a private party and not reflected on the credit report. If you open a new debt while in the mortgage process, it will be found out and will more than likely lead to a delay or denial on the loan.