Factors That Could Derail Your Closing

The following situations could delay your purchase closing date or put your loan pre-approval at risk. To avoid this risk, disclose all pending issues to your loan advisor as quickly as you can to ensure that solutions can be established, and your closing process continues as planned.

1. Late Receipt of Insurance Policy

Details of a borrower’s homeowners insurance is a required inclusion in their closing instructions and preliminary HUD-1 Settlement Statement. Closing instructions and documents cannot be prepared until the declarations pages for your policy are received from your insurance agent.
 

2. Contract and Loan Program Changes 

Last-minute changes to your contract terms—including amendments to the contract, changes to agent or seller concessions as well as changes to your loan program at the “eleventh hour” can be problematic. A complete change in the loan program—such as from an FHA to a Conventional—or changing details of your loan program, including a late decision to be non-escrow, will likely trigger any or all of the following additional steps:

• Additional underwriter review

• Update of the appraisal by the appraiser

• Re-disclosure of the Good Faith Estimate and/or Truth-In-Lending Statement

Any of these steps could delay your closing for more than 3 days, therefore it is critical to get any last-minute negotiations and changes resolved as soon as possible to prevent an unexpected delay.

3. Changes in Financial Condition

Major changes to your financial situation can derail your closing process, drastically prolonging it or preventing you from closing altogether. Avoid these potential pitfalls.

• Expensive Purchases: Lenders must verify the borrower’s down payment and/or closing costs are being paid from acceptable sources. Reductions in available cash to close and cash reserves after application can negatively affect your opportunity for approval.

• Incurring Additional Monthly Debt: Additional debt payments may increase your debt-to-income ratio (the ratio of your total monthly payments to your gross monthly income) to a level that exceeds allowable guidelines.

• Change of Employment: Any variation of employment status prior to closing, even if the change results in a more favorable compensation package, complicates the underwriter’s ability to document the job stability and secure the income documentation required by lending guidelines. Lenders are required to verify employment within 10 days of closing, so please advise your loan officer or loan processor if you are contemplating any change to employment prior to closing.

• Switching Banks or Moving Money Around: For compliance with Anti-Money Laundering and Patriot Act requirements, underwriters must document the source of all funds. Changing banks or transferring money to another account prior to supplying bank statements to verify assets could make it difficult for the lender to properly document your finances. Please consult your loan officer or loan processor if you are planning to transfer money in preparation for the loan closing.

• Last Minute Gift Funds: If gift funds are a possibility in your transaction, please notify your loan officer in the beginning of the loan process to ensure verification of the entire amount of cash estimated to close. Specific documents are needed to verify the source and receipt of gift funds prior to closing. Last-minute requests to use gift funds could delay a closing as the lender awaits the required documentation from the gift giver and confirmation of the receipt.

4. Unacceptable Source of Closing Funds

In general, funds from the buyer beyond $1,499.00 provided at the closing table must be in the form of a cashier’s check or official check from the depositor’s bank or financial institution. Please check with your specific title company prior to closing for details.

5. Missing Government Issued Photo ID

All signors present at closing must bring a valid government-issued photo ID to closing, and the closing agent will collect a copy of the photo ID.

Our team is here to help you every step of the homebuying journey. Contact one of our loan originators to discuss your mortgage possibilities.