Last Minute Lender Issues That Can Ruin Your Day, and Your Closing

By
Real Estate Agent with Solutions Real Estate CA DRE #01490977
https://activerain.com/droplet/4bhR

Last Minute Lender Issues That Can Ruin Your Day, and Your Closing

I doubt anyone will disagree that the mortgage process can be a real challenge. There are more requirements than before, a wealth of documentation that needs to be provided, and an administrative process that sometimes makes you shake your head at how long it takes. It may feel like they don’t even care that there are deadlines to be met.

etting a loan can be a challengeThe following are are not necessarily issues that will happen to you, as things vary from lender to lender. But they are all things I have encountered recently and no doubt the list could be longer – we’ll get that from the folks who comment here.

But as a buyer working with a lender and needing to meet certain deadlines (like getting your loan commitment by Day 17 per the California contract [that’s a typical time frame, but a negotiable item] and closing by a certain date), it’s best to be prepared for what you might face, no matter how good your credit, the amount of money you have or make, or the size of the loan.

Many of these items are aggravating, and even appear picayune and without justification. But lenders want them and if you don’t comply you won’t get the loan approval.

And worse, so often they come up very late in the process, like when you are already supposed to have your approval (“why didn’t they ask for this before”) and in some cases can delay, or even derail your closing.

If you have not gone through the loan process for years you may want to pull out your hair at times.

Here are some real life examples:

A request for all copies of the bank statements(s) again, including any blank pages (I get why but buyers often don’t)

A letter from the employer stating you work at your home address and not at the corporate office

Documentation proof that your deposit check has cleared your bank

More than one request to sign the 4506 T form to request a transcript of your tax records from the IRS because the signatures are too light, or for some other reason. One client had theirs rejected twice by the IRS. You can’t argue with the IRS (buyers often ask - why do I need this when I just gave them 2 years of tax records)

2 months of checks (copies) you are receiving from a pension, annuity, etc. Hard to do if you just started getting these funds

getting a loan is a lot of workComplete paper trail of funds transfers into and out of accounts (where did you get that deposit money; what was that large withdrawal from your checking account)

Complete copies of the contract with original signatures (not the electronic ones that were provided at the start of the mortgage process), at the last minute

Don’t even think of making any big purchases or doing anything with your credit cards. And be sure no one has access to your credit card who might go on a spending spree without your knowledge. Your credit may be checked right before closing (I heard of a buyer whose ex-wife still had access and racked up a huge credit card debt 2 days before he was supposed to close. Guess what didn’t happen).

*   *   *   *   *

The intent is not to scare you but simply to prepare you for the reality of getting a loan. It’s a lot of work, and sometimes the information you are asked to provide does not make sense and is a pain to have to assemble. It helps to find out the reasons.

And it helps to stay in close contact with your loan officer and your agent.

But no matter how diligent you may be, some requests of issues can still come up at the last minute that can drive you crazy. And delays are an aggravation for both sides of the fence.

Any stories you would like to share?

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Ambassador
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Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

Hi Jeff  Very informative post ..I always make sure to inform the buyers not to purchase any furniture before they move in as this could put a dent in their mortgage process as one of the big purchases . No looking at new cars either :0)

Jan 29, 2014 11:15 PM #1
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Noah Seidenberg
Coldwell Banker - Evanston, IL
Chicagoland and Suburbs (800) 858-7917

Jeff this is important stuff and very good writing. Some people think they have it in the bad while waiting to close and are uninformed.

I recommend this post.

Jan 30, 2014 12:06 AM #2
Rainmaker
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Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Jeff:  I know it may seem that way, but we Lenders are not looking for ways to frustrate and scare our clients ... or our Referral Partners.  While documentation is always a sensitive issue .. and expenditures/credit are too, most issues that I see arise are somewhat unique to the client and transaction taking place.  The likelihood of that particular issue being a problem in someone else's file is very small.  Still, we keep hammering away at those issues you mention ... furniture buying, car buying, bill payments, etc ... hoping someone else's misfortune will serve as a good lesson to our current client. 

Gene

Jan 30, 2014 01:15 AM #3
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Jane Peters
Home Jane Realty - Los Angeles, CA
Los Angeles real estate concierge services

Oh my. It is unbeleivable what is going on with the lending process. I had an extremely well-heeled buyer where it went down to the wire with one piece of paper missing. He got mad, canceled the loan and paid cash. You need nerves of steel to stay the course.  This is a great heads up for buyers, Jeff.

Jan 30, 2014 03:22 AM #4
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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Jeff, this is a major problem, but it can be at least partially solved in advance - it's now a loan officers duty to give our clients the heads up on what to expect along the way.  Sometimes an underwriter wants things that we miss, but we can do a pretty good job of getting everything prepared up front.  You mentioned some very good examples of what we give folks a heads up on (especially sending those blank pages!)

Jan 30, 2014 04:59 AM #5
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Hannah - it's certainly understandable why buyers would want to plan for their new home but buying on credit before closing is a big no no.

Thanks, Noah. This is not intended to slam lenders but to prepare buyers that there can be all sorts of issues that crop up, often at the very last minute. And these are real life and recent examples that in a number of cases delayed closing which created significant issues, depsite the lender saying all along that there would be no problem with timing. The frustration at our end, of course, is not knowing what is going on behind the scenes and not being able to have much impact. And it some cases that was true with the loan officers too, despite his/her attempts to move things along with underwriting.

Jeff

Jan 30, 2014 01:20 PM #6
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Gene

Thanks for your comments. I know this is not done intentionally, of course, and certainly there is justification for documentation to show that fraud is not in the works (and goodness knows there has been plenty of that). I suppose what is most aggravating is how long it takes, and so often at the 11th hour, with what feels like a total disregard for the dates in the contract which the lender has in their possession.

Worse is being told everything in fine and approval is imminent only to have several more days of delay for what seem to be minor issues.

I guess I like my clients to be prepared, just in case. Thankfully these are not common, and some closings are a dream, but there are have been a few ugly ones. One where buyers lost the house because of the delays and in another other buyers simply said forget the loan and paid cash because the short sale approval deadline that had been extended was going to end and would not be approved because of year end.

Jeff

Jan 30, 2014 01:56 PM #7
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Jane

I have had a couple of significatn issues with 2 buyers with substantial assets. We were told all along there would be no issues. Hah. At the end of one transaction the lender was still dragging their feet and in order to meet the deadline buyers decided to  pay cash. Lender lost out on the mortgage.

Jeff

Jan 31, 2014 02:47 PM #8
Rainmaker
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Hella Mitschke Rothwell
(831) 626-4000 - Honolulu, HI
Hawaii & California Real Estate Broker

Jeff: It can be a small thing like the Homeowners policy not being issued at the 11th hour because they don't have a photo of the property. Got solved, but not before blood pressure went up.

Jan 31, 2014 04:33 PM #9
Rainmaker
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Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Southlake, TX
Selling Homes Changing Lives

Suggested Jeff! Life in Real Estate would be easier for all if buyers followed your rules. It's not complicated!

Feb 02, 2014 01:48 AM #10
Rainmaker
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John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Jeff - I agree with you, last minute lender issues can ruin a day and closing.

Feb 02, 2014 03:38 AM #11
Rainmaker
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Eric Kodner
Madeline Island Realty - La Pointe, WI
CRS, Madeline Island Realty, LaPointe, WI 54850 -

It's the last minute part of the picture that irritates, not the items being requested.  You can't help but wonder why these requests couldn't come up earlier in the process.

Feb 02, 2014 10:09 AM #12
Rainmaker
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Lottie Kendall
Compass - San Francisco, CA
Helping make your real estate dreams a reality

This is when my buyers often have their meltdowns! I need to constantly remind them to keep their eyes on the prize, a home!

Feb 03, 2014 12:10 AM #13
Anonymous
Malissa Adair

Hi Jeff, I am not a realtor, however, I am a first time home buyer. I have to agree with everything you have said above. My husband, and I, both felt that going into this as first time home buyers-- EVERYONE-- would be helpful, informative, and detail oriented throughout this process, and boy were we surprised. We feel like we are constantly asking questions about steps, that our Realtor (as sweet as she is) and loan officer just aren't breaking down for us "1st timers". I am glad I came upon your informative post tonight, as I think it will help us better prepare for the worst, while we hope for the best!

Aug 24, 2015 02:18 PM #14
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Thank YOU for stopping by. It's such a tough process these days and communication is key. Unfortunately some i the industry make assumptions about what buyers know or don't know, and often buyers don't even know the right questions to ask.

If I can help in any way, even if you have questions, let me know

Jeff

Aug 25, 2015 12:38 AM #15
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