You’ve made the offer on a house that’s just perfect for you. The seller has accepted it, and now you just can’t wait to get the keys. So why is it taking 30 days to close this loan?
Here at Quicken Loans, we have a mission to make your mortgage process as simple as possible. Nevertheless, there are a lot of moving pieces along the way. Sometimes things take just a little bit longer than one might think.
We’ll go over some of the pain points, but there are also things you can do to smooth out the bumps in the mortgage road.
One of the biggest things you can do to help your mortgage process along is to have your documentation ready up front.
There’s some basic documentation that’s pretty common with most mortgage processes. Here’s a list that I like to think of as the terrific trio of mortgage documents:
- Two years’ worth of W-2s
- Two years’ worth of tax returns
- Two months’ worth of bank statements
These are very important for showing your income. Now, if you own 25% or more of a business, you’re considered self-employed, which comes with its own set of documents. And if you’re retired, your income would be documented through items like award letters and 1099s.
In addition to income, you also need to document any assets – whether these are used for your down payment or to pay off outstanding debt – that you want to liquidate in qualifying for the mortgage. This would typically be documented through statements.
Your lender will also need to verify any large deposits they see in your account that aren’t supported by your income documents. What qualifies as a large deposit depends on the type of loan you’re getting, but it’s within the underwriter’s discretion to ask about any deposit.
If any of your documents are mailed to a different address than the one you reported to the lender, a letter of explanation, and possibly additional documentation, will be required to verify your application is accurate.
The documents listed above are the basics, but there are many situations in which an underwriter would need to see more information from you.
Ron O’Connor, a divisional vice president at Quicken Loans, took us through some of the bigger documentation reasons that cause a loan process to be delayed.
“Some clients have specific situations such as past bankruptcies, foreclosures, previous judgments, old tax liens or divorces,” he said. “Having the documents related to these events on hand is important, as we may be requesting them through your loan process.”
If you have any collections or things showing up on your credit report that have already been taken care of, your lender may also request documentation on those as well.
If you’re receiving the down payment as a gift, you’ll be asked to provide a gift letter as well as evidence of withdrawal and deposit. If it’s an FHA loan, the donor will also have to provide a bank statement showing the funds have been in their account for at least 30 days.
Finally, if you’re a veteran, active-duty service member or surviving spouse qualifying for a VA loan, you’ll need to show your certificate of eligibility.
These are common documents that may be necessary. There may be other items that come up depending on your situation and the type of loan you’re applying for. The most important thing to remember is to get your documentation in as quickly as possible in order to expedite your loan process.
Another reason for a delay in your mortgage process is the appraisal. A common misconception is that the lender performs the home appraisal, but this isn’t true. In reality, appraisals must be completed by a disinterested third party.
The good news is these independent appraisers are experts in their field: They have to pass an examination and work as an apprentice, which requires about two years of work in the field. They also must have a four-year college degree. There’s a shortage of appraisers in some areas right now, particularly in rural areas of Oregon, Colorado and Washington.
After the appraisal and home inspection are complete, the house may need repairs made to it before you can move in, which might delay your closing date.
If the appraisal comes in lower than your offer, you have a few options. You can renegotiate with the seller to buy the home for the appraisal price. This could take a few days. You might also consider bringing the price difference in cash to the closing table.
A third option is to work with your lender to appeal the appraisal. If you can find comparable properties in your area, you may be able to get a higher valuation on appeal, saving you money in the long run. However, this will delay your time to close on your new house.
One of the other big things that causes closing delays is title problems. If there is a judgment or any other kind of lien on the property, it’s helpful to know about that up front in order to help you close the loan in a timely manner.
If the property is in a trust, sometimes it needs to be taken out; in other cases, liens on the house have to be reworked so that they take second priority to the mortgage.
We definitely aim to get your loan closed as fast as possible. The real key throughout the process is efficient communication, and we’ll be with you every step of the way. You can always reach out to a Home Loan Expert before you put an offer in on a home so you know what documentation might be needed ahead of time to avoid surprises.
If you think you’re ready to move forward, you can get in touch with one of our Home Loan Experts or call (888) 728-4702. If you have any questions, feel free to leave them for us in the comments below.
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