Refinancing With Bad Credit and Low Credit Scores

Why Mortgage Loans Do Not Close On Time And Reasons

ByGustan Cho
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This BLOG On Tops Reasons Why Mortgage Loans Do Not Close On Time Was UPDATED And PUBLISHED On January 23rd, 2020

The majority of mortgage loans close on time once a borrower is pre-approved.

However, there are cases where why mortgage loans do not close on time or why mortgage loans do not close at all.

  • The mortgage process should not be stressful
  • Reason for last-minute mortgage loan denials or stress during the mortgage process is because borrowers were not properly qualified
  • Loan officers do make mistakes
  • Pre-Approvals should not be issued with any borrowers that have credit disputes
  • The mortgage process is suspended once an underwriter sees credit disputes
  • Retracting credit disputes can plummet borrower’s credit scores where they can no longer qualify
  • Other reasons why mortgage loans do not close is because the appraisal value comes in too low
  • On purchase mortgage loans, the sellers drop the selling price when the appraisal comes in lower than the selling contract price
  • However, on refinance mortgage loans, a low appraisal could not make the refinance possible
  • Contesting home appraisals is very difficult unless there are comparable sales in the same area

In this article, we will cover and discuss Why Mortgage Loans Do Not Close On Time And Reasons.

Home Values Not Meeting Anticipated Values

Homeowners need to make sure that the tentative value they state on a refinance is as accurate as possible.

  • Home sellers should check comparable sales
  • Visit various websites like Zillow.com and Redfin.com where they can get a tentative value
  • Also, check the public records and see what comparable homes have sold for
  • Look on the multiple listing services and see what properties what similar properties are in the market

Doing these basic comparable research, home buyers and homeowners will have a basic idea of what the value of the subject property is.

Other Reasons Why Mortgage Loans Do Not Close On Time

Another reason why mortgage loans do not close on time is after borrowers have been pre-approved, there are multiple hard credit inquiries.

  • Borrowers should not apply for new credit during the mortgage process
  • Hard inquiries drop credit scores and are viewed negatively by lenders and creditors
  • Mortgage lenders are extremely strict with debt to income ratios
  • Every credit inquiry will be questioned as well as the outcome of the inquiry
  • Borrowers with  borderline debt to income ratios may be denied if they go over the maximum DTI requirements
  • Never apply for new credit or purchase large ticket items on credit card where balance and monthly credit payment increases
  • It is human nature to go and buy furnishings for a new home
  • Need to wait until after home closing

Changing Jobs During The Mortgage Process

Other reasons why mortgage loans do not close on time is when a mortgage loan borrower changes job during the mortgage process.

  • Borrowers who change or quits their job during the mortgage process, the mortgage file needs to be re-underwritten
  • The mortgage loan will need to be underwritten again and not be valid until underwriter finds that the new job is comparable to the job the borrower left
  • Even if the borrower gets a comparable job in the same field, the borrower needs to provide the lender paycheck stubs for 30 days paycheck stubs on their new job before they can close on their home loan
  • Offer Employment Letter needs to be reviewed
  • Written Verification Of Employment is required

Late Payments

Another reason why mortgage loans do not close is if borrowers have late payments during the mortgage process.

  • A late payment on the credit report will drop credit scores by at least 30 points or more
  • This would definitely disqualify from closing on the mortgage loan
  • Lenders do multiple credit pulls during the mortgage process
  • Prior to issuance of clear to close, the lender will need to pull credit and run it through the Automated Underwriting System

If borrowers have recent late payments, the AUS may not render an approve/eligible:

  • This can cause a mortgage denial

Overdrafts During The Mortgage Process

Other reasons why mortgage loans do not close on time is if borrowers have bounced checks on banking statement.

  • Lenders often request updated bank statements during the mortgage process
  • Updated bank statements are requested prior to closing
  • If underwriter discovers overdrafts in bank statements, that can be cause for mortgage denial

Other Reasons Why Mortgage Loans Do Not Close On Time

Just because borrowers got approved on a mortgage loan does not guarantee that they are home free and will close on their loan.

  • A mortgage loan borrower needs to take extra precautions from the time they apply for a loan and the time the mortgage loan will close

Any questions about why mortgage loans do not close on time or other mortgage inquiries, please contact us at 1-800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com.

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