Below is an excellent article by loan officer George Souto, on the main reason that buyer mortgage commitments are delayed. A good office will prepare his/her client to deliver detailed account information on time. Unfortunately, many officers fail to provide this one bit of advice, and buyers end up causing their own loan delays.
Bottom line for buyers: Have all of your financinal documentation organized and ready to deliver to your loan officer way before he or she needs it.
What Is The Single Biggest Reason For Mortgage Commitment Delays? If I was not Loan Originator, and did not deal with this everyday, I would probably say that Income, or Credit Issues are the single biggest reason for mortgage commitment delays, but I would be wrong. Income and Credit Issues are major reasons why Borrowers are not able to qualify for a Mortgage, but they are not the single biggest reason for mortgage commitment delays once the loan is in process. The single biggest reason for loan commitment delays are assets, and more specifically verification of assets.
These days Lenders require almost every deposit and withdrawal on a bank statement to be documented, and verified, if the origin of the deposit or withdrawal cannot be identified on the bank statement. For example, an auto payroll deposit can be easily identified on a bank statement, because it is labeled where it came from, or an online payment which states who it was made to. However, the origin of a cash deposit cannot be be identified on a bank statement, therefore, will need to be documented and verified.
While most people pay their bills online these days, withdrawals that Borrowers have to explain are usually minimal, but cash deposits are still fairly common. Just because the Borrower can identify what the deposit or withdrawal was for, does not mean they can easily provide documentation to support their explanation. When they cannot provide documentation to support their explanation, the solution maybe to not count the deposit into the available funds for Closing, causing the Borrower to be short to Close. Withdrawals on the other hand the Borrower can usually get a receipt, or statement from the creditor who received the payment to prove what the money was used for.
Another common problem with documenting assets is with transfers from one account to another. Why would this be a problem, when the Borrower should just be able to provide a bank statement for the account the money transferred from? The problem is the Borrower many times is not on the bank account, so now we have a gift situation which will need to be documented, even in the case of married couples with separate bank accounts, which is not unusual. If the loan is an FHA Mortgage, no big problem. But if the loan is a Conventional Loan we could have a major issue if the Borrower cannot show 5% of the funds as being his/her own funds.
When the documentation is finally provided many times there are missing bank statement pages, or gaps in the bank statement because the Borrower did not go back to the date of the last statement. All of this takes time to document, and Borrowers tend to not show much of a sense of urgency to provide the documentation. Meanwhile the clock is ticking on the date for Mortgage Commitment, everyone is getting testy, and unfortunately this leads to the words no one likes to here, "We Need An Extension".
I try to prepare my Borrowers during the time I Pre-Approve them for a Mortgage, on not only the documentation I will require at the time of the loan, but the documentation I will need to document the documentation. However, no matter how much time I spend preparing them, most of the time they do not do what I advice them to do.
A major number of the Mortgages that Lenders are made to buy back from Investors are because of insufficient documentation. Lenders can only buy so many loans back before it starts to create a major burden on their Warehouse Credit Line. If that happens it can lead a Lender to not have sufficient funds to fund new loans, and when that happens they are out of business.
So What Is The Single Biggest Reason For Mortgage Commitment Delays? Assets/Asset Documentation. This is the major cause of mortgage commitment delays today, and will most likely continue to be the major cause of mortgage commitment delays into the foreseeable future.
Info about the author:
George Souto NMLS# 65149 is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or email@example.com
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