Many experienced real estate agents have a general understanding of the mortgage approval process, there are a few important details that frequently get overlooked which may cause a purchase to be delayed or denied.
New regulations and updated disclosures, appraisal guidelines, property type, HOA insurance requirements, title and property flip rules are just a few of the daily changes that can have a serious impact on home loan financing.
It’s obviously important for home buyers and agents to have a clear picture of what’s needed for full loan approval and the closing time line.
Here are a few of the top things you and your agent should keep in mind:
Property Type –
High Rise, Condo, Town Homes, Single Family Residences….all have specific lending guidelines that can influence down payment, credit score and mortgage insurance requirements.
Residence Type –
If buying a second home, is it in the same city? Need to sell one home before being able to buy another? Buying a home for my children to live in, is it still considered an investment property?
Headline News / Employment –
Underwriters watch the news as well. If you work in a volatile industry, during hard economic times you may have to jump through a few extra hoops to prove your employment and income is secure.
Job changes, periods of unemployment are other things that can cause a speed bump during the approval process.
Title / Property Flip –
Property flipping is something fairly common today. It is a property that has been purchased by an investor and quickly resold to a new buyer generally within a 60- 90 day period. The investor typically does a little rehab work such as , painting, flooring, landscaping…in order to resell for a significant profit.
While this may not seem to be something to be concerned about, most lenders have strict guidelines about homes being resold in a short period of time.
These, like most rules/guidelines, are changing constantly which is why it is important to work with a knowledegable, experienced mortgage professional.
Homeowner’s Associations / Condominiums
Lenders require questionaires on condominiums that are not required on single family residences. Questions like, number of units that are owner occupied versus investment owned, any litigation going on, are home owner dues current, are there sufficient reserves to cover future expenses, etc..
There is usually a cost for this questionaire and it can take time getting the information from the home owner association.ct.
Appraisal Ordering Procedures –
The timing for ordering appraisals has changed over the last few years. There are new disclosures that have to be acknowledged prior to ordering the appraisal. Lenders also can not have direct contact with appraisers, so ordering and all communication goes through a third party. All of this means that the appraisal process takes longer than it used to, therefore this needs to be taken into consideration when writing up the closing date on the purchase contract.
If appraisals are taking a couple weeks and loan approval process is a couple weeks, then a closing that is only three weeks out, probably is not going to work.
There are a lot of “behind the scenes” things that people don’t realize can and do affect the closing of a real estate loan. It is critically important to work with an experienced and knowledgeable mortgage professional to avoid delays, problems and even losing the purchase of your dream home!
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