A thought provoking week ...

There are weeks where stuff comes up as a part of the loan origination process that makes me think, “I have to tell the community about that!”  These can be just random speed bumps that arise and can be easily avoided or serious pot holes that could detour your transactions.

Last week was one of those weeks!

Appraisals, home improvements and permits:

If recent work has been done on a home appraisers are expected to prove that the work has been properly permitted.  For example,  if the appraiser notes that a
bath has been added and does not determine if proper permits were issued, the
underwriter will request documentation to determine that the bathroom was
installed legally (with proper permits).

Be sure to ask your selling clients if they got permits prior to any recent work (say within the past 5 years to be safe).  If they didn’t get permits you may
want to try to get an inspector from the city or town prior to listing the
property.

Just last week we had a situation where a bathroom was added in the basement of a home that now has to be removed prior to closing because the owners did not have the proper permits.  Needless to say this situation caused stress and
frustration for both the buyer and the seller which could have been avoided.

Commitment dates and extended closings:

Mortgage Commitment letters have expiration dates.  This can create some concerns when a closing is months later than the mortgage commitment date.  Legally the following documents expire after 90 days and must be updated:

• Income – pay stubs
• Assets – Checking, Savings, Investment, Retirement
• Credit – must be re-pulled after 90 days but should not be re-pulled early
• Appraisal - good for 120 days before it has to be re-done.

The timing on obtaining these documents can create some issues.  For example,
investment or retirement accounts may only send out statements quarterly, or
borrowers who are paid monthly may have to wait 30 days for their next paystub
to provide the documentation required to update the commitment letter and
extend the expiration date.

ALL loan approvals are at risk if the borrower ruins their credit, loses or quits their
job or if they spend all their down payment money…. whether the commitment is
issued 3 weeks prior to the closing or 3 months!  It is important to work
closely with your lender and your buyer so that you fully understand what needs
to be done to update the mortgage commitment.

Conversely – we have buyers with extended closing dates who are required to make application right away.  This is fine as long as there is no requirement
to order the appraisal since the buyer would be required to pay for a second
appraisal if the first one has expired.

As always – if you have questions, thoughts or concerns about the timing of a
transaction, give us a call and we will walk through the scenario with you to
come up with a solution that will work for everyone.

Pre-Approval Rush:

It is imperative that you get your buyers to obtain a pre-approval
BEFORE you start showing them real estate.  This Monday I had four sets of
buyers insisting on getting pre-approved the same day in order to make an offer
on a property seen over the weekend. Speed can lead to mistakes in the
pre-approval process.  We may simply not have enough time to put together
the right package for a complicated borrower but able buyer, or we may not be
able to educate them so that they are comfortable with the process especially
when faced with a competitive situation.

It is better for your buyers, sellers and for YOU to insist that your buyers are
thoroughly and thoughtfully pre-approved in advance (which should include a review of paystubs, W-2, Bank Statements, Credit Report, tax returns) so that they are fully prepared and ready to step up and make a rock solid offer with excitement and enthusiasm and with no regrets.

Call us for a pre-approval, or with your loan related questions: 781-719-4664