The Haunted Loan Process

Reblogger Jeff Dowler, CRS
Real Estate Agent with Solutions Real Estate CA DRE #01490977

No borrower wants to be haunted by things they did not tell us or their loan officer, only to have these issues derail, or delay, their loan approval.

 

Rob shares some important matters for all buyers to be aware of. IF they apply, it's essential they tell their loan officer early on so they can, hopefully, be addressed.

Original content by Rob Spinosa 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 
rob.spinosa@rate.com

 

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

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Topic:
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Buyer Information - What Buyers Need to Know in Today's Market
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Tags:
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Rainmaker
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Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good morning Jeff Dowler, CRS -  it must be quite unverving when a house sale goes south because of ill advised actions by the buyer.

Oct 19, 2019 06:54 AM #1
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Jeff good choice of blogs to re-blog Rob Spinosa did an excellent job in pointing out what to avoid during the loan process.

Oct 19, 2019 07:22 AM #2
Rainmaker
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Sheri Sperry - MCNE®
Coldwell Banker Residential Brokerage - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Hi Jeff,

There is a lot of great info to digest if you are getting a loan. As stated, any one of these can become a huge issue.

Oct 19, 2019 12:04 PM #3
Rainmaker
3,838,865
Dorie Dillard CRS GRI ABR
Coldwell Banker United Realtors® ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good evening Jeff Dowler, CRS ,

Thank you for re-blogging this post of Rob Spinosa ..great information if you are getting a loan..off to read and comment on his post.

Oct 19, 2019 04:50 PM #4
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Certainly it’s frustrating Grant Schneider especially when it could have been avoided. NOt good news for a seller, either!

Jeff

Oct 19, 2019 05:16 PM #5
Rainmaker
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James Dray
Fathom Realty - Bentonville, AR
Exceptional Agents, Outstanding Results

Morning Jeff.

A sermon we preach to all of our buyers, and sellers alike.  Enjoy your day

Oct 20, 2019 01:29 AM #6
Rainmaker
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Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Jeff, I had missed Rob's post, but great points and especially for this time of year! 

Oct 20, 2019 07:29 AM #7
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Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

Such a great post to re-blog, Jeff! 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, do we?!

Oct 20, 2019 03:09 PM #8
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
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Hi George Souto 

Agreed. Some of it I think is just common sense, other things perhaps not. The best advice is to talk to your lender before doing anything, and disclose.

Jeff

Oct 20, 2019 06:10 PM #9
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Hi Sheri Sperry - MCNE® 

Getting a loan is a complex process and there is a ton to know. Buyers often do not even know all the questions to ask nor understand why they are being asked for certain information.

Jeff

Oct 20, 2019 06:16 PM #10
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Agreed Dorie Dillard CRS GRI ABR 

I have been through the loan process more times than I can count with multiple primary homes over the years and numerous refi’s. It’s tough even when you have done it before and working with the right loan officer is essential!

Jeff

Oct 20, 2019 06:17 PM #11
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Thanks for stopping by James Dray . Information like this bears repeating...over and over.

Jeff

Oct 20, 2019 06:21 PM #12
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Hi Joan Cox 

I thought it was a very creative post, and there is certainly some really important information here. Things CAN come back to haunt you...and not just at Halloween.

Jeff

Oct 20, 2019 06:24 PM #13
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Definitely not Debe Maxwell, CRS 

None of us want out buyers to have issues with getting a loan approval and working with a lender we know, like and trust is key. It’s a huge part of the process of buying a home and there is so much to know and do before we get the words “clear to close.”

Jeff

Oct 20, 2019 06:26 PM #14
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