Why Didnít My Loan Fund on Time?
By Leo L. Linn
If you are a Realtor, or are selling your home yourself, be sure your Lender and Escrow Company get the information they need to serve you. We see a lot of 30 day escrows, but it makes it more difficult than it has to be when we get the application and the purchase agreement on day 10. In fact, call us before you even enter into an agreement. To close on time, start strong!
1. The lender screwed up. Something was lost, ignored, or forgotten.
2. The buyer/borrowers almost have their down payment and reserves. This is one of the most common delays I see. Most lenders want to see where the down payment is coming from, and require that the bulk of the funds be seasoned for three months. If $20,000 mysteriously appears out of nowhere into escrow or the buyerís bank account, they want to know where it came from. They want to be sure it is not from an undisclosed gift or loan that could at some point interfere with the borrowerís ability to pay or the lenderís ability to collect. Frequently, buyers start the home buying process a little before all of the money is available. They are waiting for that last paycheck, or Publisherís Clearing House, or Dad to come through. This can cause problems if the money is delayed or doesn't materialize.
3.. ďOh, didnít we tell you we closed that accountĒ ... and moved the money into...Ē They usually donít have three months of bank statements, or the bank statements donít show all the funds. Or they forgot to tell us about a couple of accounts. Borrowers should keep their down payment money in as few accounts as possible, and then just leave it alone. If they donít have all of their cash at the time of the application, count on a delay.
4. ďOh, did you need to know about the bankruptcy ?Ē Yes we do. It is no longer the kiss of death, but it does need to be dealt with. Almost always there are errors on the credit report that need to be corrected, and a copy of the bankruptcy schedules need to be a part of the loan file. This is a lot of extra work for us, but if we donít have a head start on credit errors, itís hard to catch up. Two years after the discharge of a bankruptcy a borrower can be considered for ďAĒ quality loans. The borrower needs to have re-established credit and should have an excellent credit record since the discharge.
5. ď I have great credit, you donít need to run my credit as part of the pre-qualification.Ē Mr. Jones, did you know that a few other people may share your last name, and that their bad credit may show up on your report? In fact, there are very few credit reports that do not include at least a minor error. Also, credit fraud is on the rise, and little disputes that you have had with your creditors, doctors, and insurance companies often unexpectedly show up on the credit report. We can usually help you fix these, but it may take some time.
6. ď I know you told us we could qualify for a house around $575,000, but this house thatís $720,000 is just perfect...Ē A situation like this usually results in high debt-to-income ratios or a shortage of funds. If they have not exceeded our recommendations by much, and the rest of their package is in order, we still should be O.K. However, adverse changes in interest rates and undisclosed information can compound the problem to where it becomes unmanageable. Things like un-reimbursed employee expenses (Form 2016 on the federal tax returns) or a short length of time on a second job, or a simple addition error can combine to make this situation difficult.
In general, the more complicated a loan file, the greater the chance of delay, just because there is more to do and more to go wrong. If the buyer has all of their down payment, properly seasoned, and in one or two bank accounts this helps. It also helps if they have been on one job for at least two years and have a history of paying their bills on time. Of course, this isnít always possible, and thatís why you need us to work out the wrinkles. Call us early, and call us often!
Condominiums are always more work, and require more documentation, sometimes hundreds of pages. Acreage and mixed zoning properties also may cause delays and increases in cost. This is partially due to the fact that fewer lenders lend on them, and we cannot pick and choose based upon a customer service record, we are just trying to get the loan funded, period. Forget about fast and easy.
The more we know, the better we can do our jobs. So let us know anything that you think might be important. Loans can go very quickly with full cooperation from all parties, and a little bit of common sense.