Full “DU” Loan Approvals …Never Lose a Buyer Again
So Does this Sound all too Familiar?
Your buyer’s offer has been accepted, their loan has been approved and the updated loan package submitted to the investor.
Then comes the final “loan approval” BUT “with NEW conditions”. Panic sets in!! “(Re)-Disclosures” need to be signed (again?).
Rate locks are expiring! Contingency periods have expired. Movers have been scheduled.
Most last-minute conditions are “fixable” but the delays in COE (and our commission checks) ARE VERY REAL. Your future referrals will be affected. And so will mine.
Get the Lowest Interest Rate, Fees, and Fastest Service
YouTube – Straight Talk Lending – Daniel Dobbs
Here’s what causes “transactional panic” and how to avoid it.
1) Buyer’s Lack of Disclosure
“We can fix what we don’t know”! Buyers need to disclose to their lender anything & everything even remotely affecting the financing of the home including lawsuits, old student loans etc.
Just because a credit issue is not (initially) listed on a buyer’s credit report, it does not mean it won’t become an issue at the very end of the loan approval process.
Past government debt (i.e. tax liens, unpaid student loans, pending litigation, or criminal fines) often go undisclosed and usually shows up at the very last POSSIBLE moment via Cavirs.
CAIVRS stands for credit alert interactive voice response system, and is a database created by the federal government to track people who have skipped out on federal debts or obligations.
Unfortunately a “CAVIRS check” is the VERY LAST STEP of the “Quality Control” process (after loan docs are drawn, signed and returned to the doc dept.). Seldom do transactions close when CAVIRs issues arise.
2) Lack of Buyers’ Preparation/ Cooperation/ Focus
It’s easy to begin a loan application, takes about 10 minutes to fill out an application. But its providing the required documentation is when buyers often come up short.
As a real estate agent, remaining in close contact with a loan officer is critical to closing on time and if buyers aren’t providing info in a timely manner, the loan officer needs to be communicating directly to you!
Agents can encourage buyer’s prompt cooperation by reminding buyers of contingency deadlines and their earnest money is at risk if they don’t meet those deadlines.
3) Excessive Credit Inquiries
Often when a buyer is told they are pre approved, they go out and apply for more consumer credit (in anticipation of redecorating their new home) or make large purchases.
Each new “retail” credit inquiry lowers a buyer’s Fico scores by 7-10 points. In addition to drastically lowering scores, any new debt raises debt ratios therefore reducing a buyers home purchasing power.
4) Transferring funds around without a “clear paper trail”
Post 9-11 the government has used currency laws to pry into our bank accounts. Now all deposits need to be traced, there is no ability to just deposit (actual) cash into an account & then use it as a down payment. All monies will need to be “seasoned” for 60 days and paper tailed.
5) Gift Funds
If your borrower is receiving gift funds, OPTIMALLY it is best to have the $$ in their account approx. 60- 90 days before loan submission.
Doing so, eliminates the need for a gift letter (and the giver’s subsequent documentation). It will then appear as if the receiver of the gift, has a history of “savings” therefore adding “strength” to the file”.
Related Posts: Using Gift Money to Buy a Home
The most common problem with gift money is: Givers (usually “parents”) must provide a proof/source of funds (bank statements) to paper trail the funds. Often the giver resents OR refuses to provide banking info and that’s a complete deal killer!
6) Liquidation of 401k or IRA accounts
Borrowers need to begin the liquidation process approx. 3-4 weeks before the the money need to be transferred to escrow.
7) Illegible or Unsigned Documents
According to NAR “the new normal” for times to close escrow is 46 days. From the pre approval process to the offer process, straight thru to COE, items such as bank statements and pay stubs need to be constantly updated.
Whether it’s an illegible purchase contract or “smudged account numbers” on bank statements (yes…I’ve seen it all) borrowers (and sometimes agents) submit unreadable documents. And they all delay escrow’s closing dates.
7) “Servicers” are backed up.
No one wants your buyers loan to close more than the loan officer; virtually all of us are on commission just like you are.
But here’s the reality: Our industry is “boom or bust” causing most support companies (title -escrow- appraisal firms) to avoid hiring and training new employees. To be quite blunt about it, many companies prefer to poach their competitors staffs than to train their own.
Because of a lack of training programs for new hires, the processing of transactions is delayed at every level when interest rates drop and “refi mania” bursts out.
8) “Refi Mania”.
When there is an interest rate cut and mass of refinance loans get originated, often purchase transactions get pushed to the back burner.
Purchase transactions are more tedious and require much more attention to detail than refinance transactions so loan managers often push their loan officers to focus on easiest quick closings .
9) Appraisal value comes in low
With multiple offers on each property it’s tempting for sellers to choose the highest offer (vs. the most realistic COE). If the offer is all (or mostly) cash; it’s a good choice.
If the buyer has minimum down and a lack of capacity to make up the difference between sales price and appraised value, it’s probably a bad choice as the escrow may cancel.
The only other alternatives are to lower the price or order a second appraisal.
If the loan is FHA or VA, the appraised value is “set in stone” for at least 90 days, most often 6 months. (no second appraisal is allowed).
Agents can meet with appraisers at the time of inspection but rarely do so. If value is a concern, try to meet the appraiser at the property with your set of comps. It can make a difference.
10) Verification of (previous and current) employment
Over 50% of your buyers will have had a job change in the last two years or be needing to use bonus, overtime, or commission income to qualify for a loan.
For small to midsize companies with their own HR departments it’s rather routine. But with buyers working for large corporations, that data must be verified thru an automated system (i.e. TheWorkNumber.com).
It requires for the borrowers to go online, get a “one time pin number” which is only good for 24 hours, forward it to their lender who must then must access the site within 24 hr. window period.
If the buyer has had multiple job changes that will exacerbate the situation. Then we have to dance around the room, doing the hokey pokey, on one foot all the while whistling “Dixie” and lighting our hair on fire. (OK.. it just seems like it)
11) Vacation Times
Just like everyone else, the are certain vacation times of the year where our culture shuts down for holiday & these dates need to be factored in when an offer is made and the loan process in on going.
Specifically speaking the week of Thanksgiving, the 12 days of Christmas (thru the New Year) and the 4th of July; all of which employees use the long weekends to combine with sick /personal days etc. to stretch out their vacation and avoid other travel bottlenecks.
Under the new guidelines a spouse/domestic partner who is under the age of 62, can now be a “co applicant”; BUT the disbursement proceeds of the loan are/ will be reduced, based on the age of the youngest applicant.
Daniel Dobbs (.org)
Managing Broker
Mutual Home Mortgage
500 S. Kraemer # 165
Brea, Ca. 92821
Cell: 949 250-3981
Dandobbs6@gmail.com
DRE # 00986886 …..NMLS# 307631
Copywrite © August, 2018 Daniel Dobbs
All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law. For permission requests, write to the publisher, addressed “Attention: Permissions Coordinator.