What To Watch Out for at Closing
The Scouts’ motto “be prepared,” is a great way to approach the mortgage process. It would seem that many of the worst stories and largest hang-ups take place at closing. Nothing much compares with the euphoria of purchasing a house and finally obtaining the key to your future home. It makes sense that anything that derails such a crucial time in the whole process can seem particularly vexing. A hang-up at closing can seem like a crash or fall just prior to reaching the finish line.
Most people bite their nails and hope for the best when it comes to closing dates. Frequently, dates are delayed because of missing information, changes in the status, or other details. However, ultimately most of these fall into a fairly predictable list of issues, many of which can be avoided altogether with the right actions.
So let’s look at a list of six common closing failures to watch out for when it comes to closing on your next home.
- You lost a job or lost income. When it comes to any change in employment, it’s a best practice to always let your mortgage broker know. Even a promotion may cause a hitch when it comes time to close. While it seems almost counterintuitive when it comes to a promotion, employment length is a key calculation in the mortgage underwriting process. A positive change needs to be clearly documented as such. Conversely, losing a job during the mortgage underwriting process does change the equation. Make sure to communicate with your broker if you unexpectedly find yourself out of a job. And while you would never want to forgo a raise or promotion, it may be best to hold off on the job search until your closing date comes and successfully passes by.
- Your credit took a major hit. The best advice to avoid this common pitfall is not to make any major purchases or other credit-altering moves while you’re waiting to close on your future home. Opening a credit card, missing debt payments or applying for other loans is a great way to complicate your credit. Avoid these actions while you are waiting to close on your home and you will immediately avoid another common wellspring of closing headaches.
- Wrongly-spelled or mistyped names. While we are on common sources of closing delays, unfortunately typos or misspellings of names are an all-to-common source of closing delays. A simple name error can wreak havoc on the entire closing process if documents do not match up. Make sure to review any and all documents to confirm that names are consistent across paperwork.
- An error on the closing disclosure. The closing disclosure is a key, five-page document that details important information about your mortgage. Included in the list of items on the closing disclosure are the purchase price, loan fees, interest rate, estimated taxes, estimated insurance, closing costs and other expenses. Ultimately, this a very important piece of paperwork, and a large enough error on the document itself can really stymie the closing process. Let your real estate agent know as soon as possible if you think there is a mistake with your closing disclosure. Even if you are uncertain about something, it is worthwhile to ask.
- Not working with your bank or real estate attorney to guarantee access to funds for down payments and closing costs. Coordinating payment the day of closing is something that is easily and often overlooked in the mortgage process. Even if you’ve saved up that large lump sum for the down payment, a delay in the wiring of the money can delay closing. Writing a personal check will not work, as you need a certified check or wire to complete the process. To avoid this problem, inquire early about the method of payment required to complete the process. If you plan to wire funds, reach out to your bank to make sure that you have enough time to complete the wire to keep things on schedule.
- Failure to procure the necessary insurance for your home. Home insurance is important. There is no reason to not insure your single largest asset, but your lender is ultimately very concerned about the status of insurance on the property for which they are making the loan. The best way to avoid the common pitfalls that ensnare future homeowners is to stay on top of insurance. Find several quotes on insurance as soon as the offer is accepted and determine if the property is located in a hazard area. The lender may require flood insurance or other insurance if this is the case, and they will let you know the status. If your future home does require additional insurance, do not procrastinate.
The six common closing snafus listed above are really nothing to fear. While many seem to make the mortgage and closing process appear mysterious and opaque, the reality is that the process is pretty straightforward. If you take the steps outlined above, then you can help mitigate the chance that your own closing is delayed. The biggest step you can take is to select a trusted mortgage broker like Range Lending. We work with each client to guide you through the mortgage process by anticipating the issues and communicating with you throughout the process to answer your questions and keep your closing date on schedule. Reach out to Range Lending today to get started.