Avoiding Delays at Closing

Closing on a mortgage means the hard work of finding a new home and obtaining financing is finally over. But a mountain of paperwork remains to be signed at closing – and if anything is missing, or even the slightest detail is incorrect, approval may be delayed.

Delays during the underwriting process, which takes place before closing, are not uncommon.

How can you ensure that the underwriting process proceeds smoothly and in a timely manner? HUNT Mortgage has identified the five issues that most often cause delays.

• Missing documentation.

Incomplete documentation is the number one cause of application delays. Your mortgage team typically will require documents that prove your income, verify your financial assets and more.

Proof-of-income documents include pay stubs for the most recent 30 days, tax returns and W2 forms for the past two years. Business owners need to provide business tax returns, profit-and-loss statements or both. Contract employees need to provide 1099 forms and those receiving Social Security benefits need to provide a Social Security award letter.

Waiting several days to provide documents, or sending only part of what was requested, can delay the process by weeks.

• Explanations of large deposits.

Lenders are required to verify the source of funds used for your down payment and closing costs. This requirement is necessary not only for risk management, but to identify potential criminal activity. The FBI estimates that $300 billion to $750 billion is laundered through the U.S. financial system annually.

Generally, if the amount exceeds 50% of your monthly gross income, it will need to be documented. A family gift, money from the sale of a vehicle, an employment bonus or a transfer from another account are among the sources of cash that require documentation.

• Changes to your employment or income.

Changing jobs during the mortgage process isn’t always a problem, but it should never be done without talking to your Mortgage Consultant first. Even a positive career move, such as a raise or a promotion, may require additional documentation.

Other changes that can affect your mortgage include reduced hours, moving from a salary to commission, becoming self-employed or taking unpaid leave. The lender’s risk increases when the borrower’s income drops or becomes less predictable.

If your income increases because you’ve been working overtime, it will not affect your mortgage unless you work overtime for at least two years. Otherwise, overtime pay is considered to be temporary income.

• New debt or credit.

Homeowners frequently are anxious to buy furniture and appliances for their new home, but it’s best to wait until after your mortgage closing before making major purchases. Increasing your debt-to-income ratio can affect your loan approval.

It’s also wise to avoid signing up for new credit cards, co-signing someone else’s loan, increasing credit card balances or taking out a personal loan.

• Incomplete or inconsistent information.

To minimize their risk, lenders need accurate, up-to-date information.

Pay attention to details. Even a simple mismatch in employment dates can create a delay. Make certain names and addresses are consistent on all documents, and no signatures are missing.

Addressing these issues will help ensure that your closing proceeds smoothly and without delay. Have your Mortgage Consultant guide you or contact HUNT Mortgage for assistance.

 

The information above is accurate at the time of posting, but it is subject to change based on market conditions.