Too often buyers are under the impression in a residential real estate contract that if they have a loan commitment, they are in pretty good shape to close. While for the most part that is true, there have been several instances of late that have shown just because a buyer has a loan commitment, does not mean the buyers are going to get the loan. Hence to paraphrase Yogi Berra’s famous quote “It ain’t over ’till it’s over”, a “loan isn’t closed until it’s closed”.
While the norm is that the majority of loan commitments result in the borrower/buyer being able to obtain a loan, it is taking significantly more time for these loans to be deemed “clear to close”. This is significant as a loan will not be putting on the lender’s closing board and subsequently wired unless it is deemed “clear to close”. While this is partly the result of the overwhelming volume of loans being processed, it has more to do with the significant amount of regulation that has come down since the real estate bubble burst. Whereas years ago, some would argue, very little documentation was needed to obtain a loan, the current market requires a significant amount of documentation be provided to the lender, as well as an explanation for deposits and withdrawals in excess of a monetary figure be provided by the applicant borrower. These factors can cause a significant delay in the loan process which can cause (i) documents to expire whereby they need to be resubmitted, (ii) rate locks to expire, which can cost the borrower/buyer money to extend, (iii) the seller to become frustrated and walk-away, and/or (iv) applications to be declined for a variety of reasons.
The above is not to scare a potential buyer away from applying for a home loan. What the above is intended to do is make the buyer aware that nothing is for certain until the loan proceeds have been wired and the buyer’s lender has authorized the disbursement of the same. A key way a borrower/buyer can minimize this risk is to provide the lender with all of the information he/she requires in a timely fashion and to stay in contact with the lender on a regular basis to make sure that there is nothing else needed, and if there is to provide it as expeditiously as possible.
For more information regarding residential lending, you should consult a mortgage broker, mortgage lender, and/or an attorney.
*The information in this blog posting is for general information purposes only. Nothing in this blog or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. The information in this blog is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.