How to Avoid Loan Approval Delays or Denial
Congratulations! You finally found your clients the home they’ve been dreaming about. You made a bid and had it accepted. Your buyer has met with their Loan Officer, completed the mortgage application and the loan approval process is underway. Everything is looking good, the closing is only weeks away and even though you’re hesitant to allow yourself to get excited, you’re secretly doing the happy dance.
It’s smooth sailing from here, right? Probably. However, in an industry that feels like a continuously moving target, it’s not always easy to recognize what the next potential pitfall for our clients might be. So here’s a little “old school” advice on how to advise and guide your clients through the treacherous waters known as today’s real estate transaction:
Tips to Avoid Loan Approval Delays or Denial
Don’t: Allow multiple credit checks
Depending on your client’s credit score, 3 points could make the difference between approved and denied. One additional credit pull might make that difference.
Don’t: Take out any new debt
This seems like one of those “are you kidding me???” moments, but the truth is we’ve seen this delay or even derail a closing more times than we care to admit. Let’s face it; the temptation to buy is strong when there are so many exciting purchases to be made for that new home. Everything from appliances to furniture can lure your clients into a decision they should have waited to make.
Remember: We will re-pull credit just prior to closing and if a new debt appears, it could potentially be fatal to the approval.
Don’t: Change Jobs
Encourage your clients to hold off on accepting that new job offer until they’re closed. While this isn’t necessarily a deal killer, it can be a deal delayer. One of the factors mortgage companies consider is the length of time they’ve been with their present employer and as you can imagine, they are partial to stability. At the very least, changing jobs initiates the need for more paperwork and additional verifications.
Do – File tax returns and/or extensions
We will require copies of transcripts from the last 2 years
Do – Explain or documents all inquiries on your credit report
The key piece here is that NO new debt has been established. I know it seems like were beating a dead horse, but it’s THAT important!
Do – Disclose all Debt: Even if it did not show up on the credit report, make sure it’s disclosed to the lender. Believe me – they will find out eventually and it’s always better to catch it early in the transaction.
Do – Work with a knowledgeable lender
It might feel like a shameless plug, but the truth is, working with a knowledgeable and educated lender is critical. If your Loan Officer can’t navigate your client through the loan process and easily identify potential problems, you might end up delayed or worse – denied.
More than one buyer (and real estate agent) has had the wind knocked out of their sails at some point by making a few of the mistakes I described above. These are just a few tips to help you avoid surprises, or worse yet, a rejected loan just days before closing.
