Common Mortgage Closing Delays

When purchasing a home, it is crucial to provide thorough information and documentation to your mortgage lender in order to receive a timely and final approval. There are many reasons that may lead to delays after applying for mortgage. Just consider, the number of different parties involved in the mortgage approval process, if any of these parties are delayed, they could slow down the whole process. After a loan application has been taken, the lender could ask for additional information from any of the parties involved; for instance: the real estate agents may not have completed all the necessary forms, the title or escrow company may fail to complete the title exam or title work on time, the seller may have title issues or other delays, the property may encounter acts of God, the private inspection may find repairs that need to be negotiated, the appraisal may call for required repairs, as well as many other possible delays. It is vital to provide your lender with all the necessary information to complete your loan application; the basic information needed includes: your pay stubs, tax returns, and asset statements. Although your lender may need additional information, which may include any or all of the following: an explanation for any bankruptcy(s), separation and/or divorce decrees, credit issues, gaps in employment, or anything you may deem vital in your employment or credit history. Incomplete applications may also delay the appraisal from being ordered. Although there is an unlimited list of reasons why your mortgage could be delayed; the following are the most common areas where delays occur:

• Changing Jobs During the Loan Process - It is imperative that you keep your loan officer informed of any changes to your income during the loan process. If it is necessary to change jobs during the loan process, inform your loan officer immediately. If any of the new income is commission, bonus, tip, or 1099-based; the income may not be able to be used unless you have a two year history of receiving this type of income. Also, if the new job has a probationary period, most lenders will not use the income until the probationary period has expired.

• Cash Deposits - Lenders will require a minimum of the last 60 days banking activity to approve a mortgage loan. If there are any unexplained cash deposits, these will have to be explained and thoroughly documented. If they cannot be documented, they will most likely not be used as verifiable or usable income for loan purposes. Also, completing gift documentation up-front will allow time for the lender to review the gift documentation and inform the borrower if anything is incomplete.

• New Debts- Lenders will most likely require a soft-pull credit report be reviewed within a few days of closing your new mortgage. If there are any inquiries for new credit since the application or any new accounts have been opened, these will have to be explained and documented prior to closing your mortgage. If there are new debts with monthly payments, these will change your debt to income ratio and may result in the denial of the mortgage.

• Missing Documentation- When you provide information to your lender, make sure that you provide all pages of your bank statements, all pages and schedules of your last two years tax returns, and all W2s and 1099s for the past two years. If you are using gift funds for the purchase of your new house, you must thoroughly document the gift. You should provide a fully signed gift letter, copy of the gift check, proof that it has cleared the giftor's account, and a bank printout showing the activity from the last bank statement to the date of the deposit of the gift check.

There are many reasons that may cause your mortgage closing to be delayed. It is essential that you inform your lender of any change in your income, debts, or employment. Any changes in these areas may result in a potential loan denial. Informing your loan officer of these changes may allow them to either advise you prior to making these changes, or allow them to make the appropriate changes to your loan or loan type so you still receive an approval.

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