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HoeRoadblocks to Closing & How to Avoid Them

July 3, 2012

House shopping is exciting and fun, and if all goes well, it ultimately ends with a mortgage closing and keys exchanging hands. If all goes well….

But what happens if obstacles pop up?  Unfortunately, it happens. Here are a few reasons they occur and how your clients can avoid them.

Home inspection = problems.

A home inspection should be done – absolutely.  But they can throw a wrench into a home sale. If the inspector discovers a large number of needed repairs or they are costly, the closing may be in jeopardy. The buyers can decide they don’t want to buy a house that has problems, even if they are repaired, and so they bail out. Or the seller may balk at the estimated cost of the repairs or disagree with the necessity for them.  The expense may leave them without any proceeds from the sale, making the deal less attractive to them.

Solution: A seller doesn’t have to be surprised by the results of a home inspection. Many are having inspections done proactively before they list their home so they can address the issues ahead of time and increase the likelihood of a smooth sale.

Financing falls through.

Even if the buyer and seller agree on a price and the conditions in the offer to purchase, the financing can set back a mortgage closing for several reasons:

  • Career changes: Buyers think once they’ve been approved for a mortgage, they are set and can switch jobs.  However, a major consideration in underwriting is the consistency of employment and income as stated on the application, so it’s important to stay put in the same job until the closing is complete.
  • Major purchases: Income to debt ratio is another major area that lenders consider when approving a mortgage. A new car or boat purchase or large furniture purchase may mean greater debt or less in savings, and that may be enough to skew the numbers against a mortgage approval, even if the buyer’s been preapproved.
  • Out-of-town appraiser: This is a topic we’ve discussed before. Local appraisers have the knowledge and familiarity with local neighborhoods to more accurately capture market value. Proximity to coveted parks or schools, comparable neighborhoods and homes, desirability of home styles or lots… all of these things may be missed by an out-of-town appraiser, but they are important to the value of a home. That’s why it’s important to work with a lender who uses local appraisers.

Solution: Overall, it can save a lot of time and heartache if a buyer becomes pre-approved by a lender before they begin looking at homes. A loan officer can not only tell them how much home they can afford right up front, but they can also warn them about some of the issues above so they can be avoided.

We think it’s important to arm buyers with the information they need, so we offer free preapprovals that take just a few minutes on the phone with a loan officer.

The Calendar?

Mortgage rates can change daily. However, the timeline to close loans, particularly short sales and foreclosures is much longer than it was several years ago. Because interest rates are typically locked for 30-90 days, depending on the program, all parties must be aware of how dates and delays may affect the loan terms.  A higher interest rate or the need for a bigger down payment can surprise a buyer and even torpedo the deal all together.

Solution: Work with realtors and lenders who are experienced, detail-oriented, and communicate regularly with all of the parties to ensure everyone is on the same page. A knowledgeable loan officer and realtor will be realistic, but also skilled in keeping the process moving forward so it can close on time.

Daphne Johnson

From Loan Officer Daphne Johnson

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