How to Avoid Loan Closing Delays

How to Avoid Loan Closing Delays

FORMAL DRESSES

Loan closing delays are a frustrating part of the mortgage process. If you've done everything right throughout the process and made all the plans necessary to take ownership of a new property, the last thing you want to learn at the eleventh hour is that something has come up to stop the deal from closing. It's essential when this happens to stay calm, remain productive, and identify the problem so that you can successfully address it and move forward with your plans. Here's a closer look at some common causes of loan closing delays and how to deal with them when they arise.

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Opening new accounts

The process of underwriting a mortgage is a lengthy one. From the pre-approval process forward, every detail of your financial life is examined under a microscope. One of the most important elements that lenders consider is your debt-to-income ratio. Once you're in the final steps of having a mortgage approved, it's important that nothing really changes. Usually in the day or two before closing, the lender will pull another copy of your credit report to ensure that nothing has changed. An auto loan or a new credit card could be the basis for stopping a mortgage in its tracks. Avoid opening new accounts once the mortgage is underway.

Changing jobs

If you're changing jobs, it's often best to wait until your mortgage is settled. A last minute job change can completely change your ability to qualify for a mortgage. For example, moving from company to company and taking a pay cut changes your financial picture. With a lower income, you may no longer meet the requirements for the amount of the financing you're seeking. If you're in a field where much of your income derives from bonuses, commissions, or other variable income, it's important to have an established history of that income for mortgage approval purposes (usually two years). As a result, taking a job with one of these compensation models could mean you no longer qualify for your proposed mortgage.

FORMAL DRESSES

Additional documentation requests

Lenders can sometimes request additional documentation very close to the closing date. For example, they might ask for copies of a rental agreement on a multi-family property, for the latest copies of your paystubs, or the current month's financial statements for your accounts. During an already busy time, tracking down these documents adds another layer of stress. There are two ways to try to avoid this. One is to comprehensively gather as much documentation as possible before starting the loan process. The second is to touch base at regular intervals with your lender to check on anything else that might be needed to head off last minute requests.

Using credit cards

As you're pulling together the cash needed for a down payment, it's easy to imagine being tempted to place expenses on credit cards. But it's important to remember that any change in your credit card balances could be a red flag as it changes your debt to income ratio. Avoid using your credit cards and consider paying cash for basic expenses and delaying major purchases until after the mortgage closes.

Getting financing for a home transaction is a complicated process. Even if you've done everything right along the way, it's easy for things to come to a grinding halt if one of the issues above comes into play. Increase your chances for a successful mortgage by carefully choosing a knowledgeable and diligent lender in your area.