One of the most exciting moments when buying a home is the closing, which is when you sign your final loan documents. This is usually the last step before you can move into your new home.
Sometimes, however, closing dates are missed, often for reasons outside of the borrower’s control. Not closing on time can cause problems for both you and the seller. Thankfully, there are ways to increase the likelihood that you will close on time.
Before financing your dream home, your lender will need detailed information about your income, assets, debts, and the details of the property. If you want your loan to close on time, it helps to start gathering these documents as soon as possible, even before you fill out a loan application.
In most cases, your lender will at least need to see one month of pay stubs, two years of W-2s and tax returns, and two months of statements for all your savings accounts. If you’re self-employed, you will be asked for a profit-and-loss statement for your business, which can take time to create if you haven’t done it before.
The bottom line—it helps to be prepared for whatever your lender needs. To see a full list of what this may include, go here.
The second most important thing you can do to make sure your loan closes on time is to not to put off responding to any requests your lender has. If your lender asks for more information or additional documents, it’s because they cannot approve your financing without it.
And lenders often ask borrowers for more information. For instance, they may ask you for a letter explaining any missed payments on your credit report. Until they get that letter, your loan—and your closing—will be on hold.
This doesn’t necessarily mean you need to immediately drop everything when your lender asks for something. In most cases, replying within two working days is fine. But the wisest course of action is to respond as quickly as possible, so everything stays on track.
Avoid Big Financial Moves
One of the worst things a borrower can do is make a major financial decision during the loan process, like buying a new car or changing jobs.
Let’s say you get approved for a mortgage, and a week later, you decide to finance a new boat. That purchase is going to affect your debt-to-income ratio, which your lender will need to recalculate to see if you still qualify for a mortgage.
For this reason, it’s best to first speak with your loan officer before making any significant financial moves while your loan is being processed—or simply avoid them altogether.
Look For Protection
As the saying goes, nothing in life is certain except death and taxes. There’s always a chance that you can do everything your lender asks for and your closing could still be delayed.
Perhaps there is a lien or a judgment secured by the property that the home seller didn’t know about. These issues will need to be cleared before closing, and this often takes extra time.
It’s a good idea to find out what type of protections your lender offers for unseen events like these. For example, Right by You Mortgage offers an on-time mortgage closing guarantee designed to reduce a borrower’s stress about closing on time.
To qualify, there must be at least 25 days between the time you sign your sales contract and the closing date, and you must complete your mortgage application within two business days of your sales contract. You also need to respond to any requests from Right by You within two business days.
If you’re eligible and your loan does not close on time—which is very rare—we’ll pay both you and the seller of your new home $500 each.
If you are thinking about buying a home and want a stress-free closing, a local Right By You Mortgage loan expert can help. Give us a call at 1-877-552-2242 or drop a note to email@example.com.