In my continuing series of answering some of the most frequently asked questions that I get from clients and prospects, in Part 5, I want to discuss the various stages where a loan transaction can go sideways as well as some of the issues that derail a loan transaction.
There are several stages of a loan transaction and at any point in the transaction and at any stage in the process, something can go wrong. The important thing to remember is what can be done to resolve the problem so that the transaction can get back on track and proceed to the close of escrow (COE).
While many problems and/or issues can be resolved with some time and a little work (and additional documentation), there are other problems and/or issues that are simply what we call deal breakers. However, even many deal breakers can be avoided from the get-go with some due diligence from the parties in the transaction.
The first stage of the loan process is the pre-approval process and it's during this stage that the borrower and an experienced Mortgage Loan Originator (MLO) can discover and resolve any potential and future deal breakers.
During this process, the MLO will request and collect of whole boatload of documentation from the borrower in order to assess the borrower's ability to qualify for a mortgage loan based on their personal and financial status and their credit worthiness.
It's here that an experience MLO will discover and review with the borrower any issues that will disqualify them for a loan. Sometimes with some additional documentation, these issues can be resolved in order to satisfy any future requests, conditions and/or guideline requirements.
Before issuing a pre-approval that will be conditional on the borrower finding a property that qualifies, it's absolutely vital that the MLO and borrower resolve any personal, financial and/or credit issues that could disqualify them from receiving final approval for a mortgage loan.
The next stage of the process is finding a property that meets the guidelines and requirements for the loan program that the borrower has been pre-approved for. For example, if the borrower has been pre-approved for an FHA loan, there are specific property requirements that the subject property must meet before FHA will agree to insure the loan and the lender will agree to fund the loan.
If the borrower is receiving any down payment assistance (dpa), then there will be specific property requirements that are required from the dpa agency that administers and manages the dpa program.
A good example of required property qualifications are tenant occupied properties. FHA requires that borrowers occupy the subject property within 60 days. Many FHA approved lenders, will require proof that the tenant has vacated the property before the COE or the lender won't fund the loan. However, the charters for dpa programs doesn't allow their borrowers to displace tenants so tenant occupied properties are not eligible properties for borrowers receiving dpa.
Another property requirement that has often become a deal breaker for many transactions is property condition. Many loan programs as well as lenders, require that a property be habitable and free of any structural damage, health and safety hazards as well as any building code violations by the COE. These particular requirements will often derail a loan transaction if the subject property has any of these issues that will not be corrected by the COE.
There are other issues and/or problems that can derail a loan transaction but the most important advice I can offer to buyers is to work with professionals who are experienced at not only detecting and resolving issues from the get-go but who are also skilled at resolving any problems that come up during the transaction to the satisfaction of all the parties involved.
Buying a home is one of the most important decisions someone can make. Today's real estate market can be really scary, which is why it's important to get as much info as possible before starting your search. Borrowers really need to do their homework before they even start the process of getting pre-approved and looking for a home.
The pre-approval process is not a simple process and it's because it can get really complicated and convoluted, that borrowers today need affordable loan options that are best suited for their own needs. Don't choose your MLO/lender and your Realtor/agent carelessly. Choose wisely by choosing experience professionals.
If you have any questions and/or concerns, please feel free to contact me, Donne Knudsen, at 805.2069123 or donne4loans@earthlink.net. That's what I'm here for and I would love to be able to assist you in your search for an affordable home loan or if you need a referral to a really good Realtor/agent.
What Kind of First Time Buyer Programs are Available in Los Angeles & Ventura Counties? FAQ - #1
What kind of property can I buy? FAQ - #2
What Kind of Paperwork Do You Need to Pre-Approve Me? FAQ - #3
What are Impound Accounts & Why Do I Need to Have Them in Order to Close My Loan? FAQ - #6
Can You Help Me Get My Kid Get Out of My House? FAQ - #7
I'm Supposed to be Closing Next Week Can You Help Me? FAQ - #8
If I Buy a Duplex, Can I Apply the Tenants Rent Towards My Mortgage? FAQ #9
What Happens if My Appraisal Comes in Low? - FAQ #10
What is a HomePath Property and How Can I Buy One? - FAQ #11
Can I Still Get a Loan if I Don’t Have Perfect Credit? – FAQ #12
Are There Still Loan Programs Where I Don't Have to Put Anything Down? - FAQ #13
Photos courtesy of flickr: bradleyalexander tinitoac fhaoutreach
Comments(7)