The Haunted Loan Process

Mortgage and Lending with US Bank NMLS: 22343

The Haunted Loan Process


As we wind our way closer to Halloween, I wanted to cover a few of the graveyard variety hobgoblins of the mortgage process.  You know, the things our clients don't tell us at the start and that later come back to haunt their home loan transaction like so many nightmares on Friday the 13th.  The goal here is not to scare the prospective borrower, but instead to provide fair warning about the actions you can take or avoid at the start of your application that will help you close your loan on time and without undue stress.  Let's peek-a-boo at some of the most common loan zombies that come out when the moon is full:


  1. Amending a tax return.  It can be such an innocent mistake.  You file a tax return and later amend it for some reason.  When we ask you for your tax records, you provide us with your Forms 1040, but forget there is a 1040X out there as well.  We order an IRS transcript (Form 4506T) and our numbers on the tax return don't match the numbers on the 4506T.  Now, you're not in trouble with us or the IRS, but we do have to underwrite to the amended return.
  2. Beginning or not disclosing ongoing work on the property.  Open walls, torn up flooring, room additions underway, no fixtures in a bathroom, an empty swimming pool, etc.  This is not a complete list, of course, but always tell your lender if your home is in any way undergoing work (or will be) when an appraiser comes out.  In general, you will not be able to fund your loan until all work is complete and a reinspection by the appraiser confirms such.
  3. Changing or leaving jobs, or giving notice.  Expect that every lender will complete a prior-to-funding (PTF) verification of employment.  If you are no longer on the job just before close, or if you've signaled your intent to leave the job, we may have a major issue.  In short, the employment by which you qualify for the loan is the one that needs to be in place when you close.  
  4. Co-signing on a debt for someone else.  Most often, co-signed debts will show up on the credit report, but if they are new or unreported to the credit repositories, we often have to factor them into the debt ratio (DTI) at that time.  The conventional wisdom is to never co-sign for anything.  In reality, life is more complicated than that and it happens.  Where it does, tell us up front.
  5. Disputing a credit item.  It may seem like the right thing to do and it may make you feel better about sticking it to a creditor who's done you wrong, but disputing a credit item while in the loan process can take on a ghoulish character.  The advice here is don't do it until we're funded, but at the bare minimum, let us know when you're thinking about it.
  6. Failing to disclose a property you own.  Our borrowers often believe that if they own a property free and clear, there's no way we'd know about it (and more importantly, why would it matter?).  But remember that real property ownership means there's county records and we can find those.  And about the fact that it's free and clear?  Good for you but it still doesn't address property taxes and insurance?  Those go in your DTI too.
  7. Moving unsourced money into your bank accounts.  This one has stopped more purchases of brick and mortar than Amazon.  When you go to buy a home, know that we will look back at least two months (via bank statements) to confirm that all of the money for your down payment, closing costs and reserves is accounted for and meets guidelines.  If you try to move money into your account, we will often question the deposit.  So it's essential we identify, reveal and document how you plan to close the transaction when it comes to your money.
  8. Not making a mortgage payment when refinancing.  "But I thought we would close by then..."  Famous last words.  Remember, when you are in the loan process, you are not done until you have keys in your hand or, in the case of a refinance, your new loan is funded and recorded and the old loan has been officially released.  During that time, it's imperative you continue to make your regular mortgage payments.  "If there is any doubt, there is no doubt," goes the old mountaineer's saying.  Keep your existing mortgage current at all times.
  9. Recurring payments for a loan or other obligation.  If you have undisclosed debts or payments and we see a recurring withdrawal from your bank accounts, expect that we will ask.  If the item is discretionary, it's likely no issue, but if it is an obligation we will want to consider it in your debt ratio.  The sooner we find out about it, the better.  So let us know at the outset.
  10. Taking on new debt before closing escrow on your purchase.  Early in my career I had a young, homebuying couple sign their loan documents on a Friday afternoon.  Jubilant with their new purchase, they spent the weekend shopping for furniture and outfitting their new home, including opening a store credit card where they proceeded to take advantage of the new customer discount on their large purchases.  On Monday, when confronted with the question of whether they took on any new obligations over the weekend, they said yes.  Their rationale?  "Oh, we closed when we signed on Friday."  The lesson here is that it's not entirely their fault.  Our industry can do a better job of explaining the closing process and when borrowers are "all clear."  I learned a lot from that experience and have used the lessons ever since.  On a purchase transaction, you are not closed until you are signed, funded and the deed is recorded with the county.


Look, some of the above may seem funny or obvious.  But the reason I've listed them is because they happen.  Over and over and over.  We've dealt with each and if you find yourself in a bind as a result of any of them, don't hesitate to get in touch.  We don't stand in judgment of how things happened and instead we focus on solutions.  Let me know if I can be of service today.


Trick or treat, 



Robert J. Spinosa
Vice President of Mortgage Lending

Guaranteed Rate
NMLS: 22343 
Cell/Text: 415-367-5959


Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960

Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate's Human Resources Department.


Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood ChicagoIL 60613 - (866) 934-7283

Comments (27)

Brian England
Ambrose Realty Management LLC - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

You list a lot of things that can certainly cause a loan to go sideways, so it is definitely beneficial to educate buyers and make sure that everything that will need to be dealt with is on the table before making offers.

Oct 17, 2019 08:19 AM
Michael Jacobs
Pasadena, CA
Pasadena And Southern California 818.516.4393

Hello Rob - it's often scary or frightening to the uninitiated and the unprepared borrower but your haunt-avoidance loan strategy is beneficial to those who are fortunate to work with a mortgage professional like yourself.  

Oct 17, 2019 08:41 AM
Nick Vandekar, 610-203-4543
Realty ONE Group Advocates 484-237-2055 - Downingtown, PA
Selling the Main Line & Chester County

Rob I find #10 interesting that the deed needs to be recorded. I would have thought that if it was funded and all signed at the settlement the buyers would be able to purchase new things for their home. Never heard before that it has to be recorded as well. In our area that can take several weeks or even a couple of months to be recorded and show in the public records. I have heard of buyers opening new credit lines before settlement messing up closing to the extent it has not happened.

Oct 17, 2019 10:12 AM
Rob Spinosa

Great point, which highlights regional differences.  In theory, you are correct in that once the loan is funded, any financing-related items are now clear.  However, in practice, the only way we can reliably advise our clients here in CA that the transaction is closed is that they have the keys in hand (or in the case of a refinance, the deed is recorded and old loan reconveyed).  I guess the point ends up being, we have to advise our clients as to when the coast is clear, and that varies depending on customs in any given geography.  I could have been more clear about that.

Oct 17, 2019 11:46 AM
Anna "Banana" Kruchten

We always don't count it closed until it records.....just to make sure buyers don't go out and go nuts spending on  stuff for their new home.

Oct 18, 2019 12:50 PM
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi

You're absolutely right, Nick Vandekar, 610-203-4543 ...  local customs/rules, etc. count in many aspects of a real estate transaction.  We can't leave it to our clients to assume anything regarding these issues.  Info this important must be shared with clients.  Too much hinges on it ...


Oct 18, 2019 02:10 PM
Roy Kelley
Retired - Gaithersburg, MD

This is excellent information to share with prospective mortgage borrowers.

Oct 17, 2019 12:56 PM
Anne Corbin
Long and Foster - Lake Anna - Spotsylvania, VA
Serving Lake Anna & Central Virginia

I have lost a closing because the buyer did something after signing the contract that changed his ability to purchase. Educating buyers is so important!!

Oct 18, 2019 03:41 AM
Kat Palmiotti
eXp Commercial, Referral Divison - Kalispell, MT
Helping your Montana dreams take root

I had a buyer purchase a very expensive car the afternoon after he applied for his mortgage. Luckily it all worked out, but it was a bit iffy there for a while.

Great list!

Oct 18, 2019 05:14 AM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Hi Rob:

Great education here for buyers who might not understand the potential implications for these issues and the risk to their loan and closing. I know of several buyers who were specifically told not to take on any new credit while in the process, among other things, but did it anyway thinking they were far enough along in the approval process.


Oct 18, 2019 11:35 AM
Anna "Banana" Kruchten
HomeSmart Real Estate - Phoenix, AZ

Hi Rob Spinosa this is an excellent list of 'got cha' issues that every buyer needs to read....and agents as well.  Haunted List for sure!

Oct 18, 2019 12:48 PM
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

Excellent post, Rob Spinosa ... the number of hobgoblins we must entertain and ask about with our clients is vast.  That last one on your list is a killer.  I actually had one client that went and returned a brand new pick-up because of that little timing issue.  Oops ... they'd forgotten our conversation on that issue!  All ended well, but they were sweating it out for a bit ...

Congrats on the Feature!


Oct 18, 2019 02:03 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Rob all 10 are biggies.  I will suggest one more a new tax lien or judgment and claiming you did not know about it.

Oct 18, 2019 03:09 PM
Kris Collis, Associate Broker
Smart Way America Realty - East Stroudsburg, PA
Professional Results you Expect 570-801-5525

Rob Spinosa What a great featured post.  Bookmarked.  Your poins are a must read for borrowers, will forward to my buyers.  Thank you.

Oct 18, 2019 11:29 PM
Shirley Coomer
Keller Williams Realty Sonoran Living - Phoenix, AZ
Realtor, Keller Williams Realty, Phoenix Az

This is a great article for anyone applying for a loan to read ahead of time!  The more a buyer understands the easier the process will be.  No one likes surprises!

Oct 19, 2019 06:23 AM
Debb Janes
Nature As Neighbors - Camas, WA
Put My Love of Nature At Work for You

One of our clients recently refinanced a car loan, days before closing on her new house. She was angry with the lender who explained he needed to resubmit her credit to underwriting. She was incensed because the new loan was a better rate and resulted in a lower payment. Geez, what part of no major purchase did she miss. It ended up closing okay, but not without a bit of drama - she created. 

Oct 19, 2019 06:49 AM
John Juarez
The Medford Real Estate Team - Fremont, CA

We had a buyer whose salary verified through pay stubs was adequate to qualify him for a certain mortgage amount and so we got him into escrow. As the loan underwriting process went forward and his tax returns came under scrutiny, it turned out that he played in a band and earned extra income...but...the associated business expense rightfully and legally shown on the tax returns turned the income negative. That resulted in an underwriting decision that he did not qualify for the needed loan!

The story ends with him as a new homeowner after frantic scrambling made everything work out. That was quite an experience!

Oct 19, 2019 09:32 AM
Sheri Sperry - MCNE®
Coldwell Banker Realty - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Hi Rob,

Besides all the great info.  I love the title. 

Oct 19, 2019 12:05 PM
Eva B. Liland Century 21 Doug Anderson
Century 21 Doug Anderson - Lancaster, CA
Glad to be of Service 661-714-1643

Any buyer that gets referred to you from an agent, should be very grateful for your vast knowledge Rob Spinosa . Bookmarked for future reference!

Oct 19, 2019 07:44 PM
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

I have sent this to all my buyers in my pipeline!  Thanks so much for a brilliant post! 

Oct 20, 2019 08:30 AM
Debe Maxwell, CRS
Savvy + Company (704) 491-3310 - Charlotte, NC

Yet another reason for buyers to listen to their agents and utilize a lender from their preferred list. We don't just make those lists willy-nilly! Thanks for another great post, Rob!

Oct 20, 2019 03:10 PM
Ray Henson
eXp Realty of California, Inc. (lic. #01878277) - Elk Grove, CA

A few years ago, a buyer on one of my listings was working over 40 hours a week and qualified easily to buy my listing.  The lender verified the job late in the process.  Yes, over forty hours a week, but the job title was for a part time job.  The employer would not change the title or guarantee the buyers hours.  The buyer lost the house and we had to start over.  Even my client felt bad.  A conscientious lender is a must.

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Apr 04, 2020 04:01 PM