Financing is the backbone of any real estate transaction. Whether you use personal capital, hard money or a local bank, how you finance dictates the deal. In a perfect world you would close all your deals with cash and avoid going through the closing process. However, there are times when you need to utilize a lender program for a variety of reasons. When you do it is imperative that you hit your closing date. Pushing your closing back, even a few days, causes a domino effect that impacts your business. In extreme cases, it may even cause you to lose out on the property. Closing on time isn’t a luxury, it is often a necessity. Here are five tips to help make sure that you hit your closing date.
- Use The Right Lender: There are several factors that determine your lending choice. You may be influenced by previous relationships, fees or a specific program that appeals to you. Lost in all of this is the most important factor of all: your ability to close. Getting the lowest fee doesn’t do you much good if you lose the deal because of constant mortgage extensions. Only if everything else is equal should you evaluate fees and closing costs. You need to choose your lender based on experience and how confident you are they will do what they say when they say it. Anyone can tell you what you want to hear when you are shopping around. However, when push comes to shove you need to be sure your deal will get to the closing table. Go to the company website or their business Facebook page and see if there are any testimonials. Don’t be afraid to ask about previous deals and get everything in writing. Closing on time starts with choosing the right lender for you and your credit profile.
- Anticipate Items: As much as things have changed in the mortgage business, plenty of items have stayed the same. There are a handful of core items that every lender needs on almost every loan scenario. You should expect to provide your tax returns, two months of bank statements, a few paystubs and a fully executed contract. If there is anything funky on any of these items, you should work on getting them before your loan is submitted. A large withdrawal or deposit would need to be verified and explained with a paper trail. Instead of questioning or complaining about these you should get on them asap. A good broker, or lender, can anticipate what will be needed before the lender even asks for it. Getting these items over in a timely manner saves days of back and forth with the lender. Every day you wait other loans come in that forces yours to the bottom of the pile. It is also better to be a step ahead of the items needed, then to pay catch up for the entire transaction.
- Same Day Response: The biggest difference in the mortgage process from a decade ago are the unexpected items requested. In the past if an item was signed off on by an underwriter it was off the list and you could move on. Today, there are a few layers to underwriting meaning they can ask you for anything at any time in the process. During this time, you should try to make yourself available throughout the day. Most of the items needed are cured either with a signature, an email or a fax. If a lender is asking for three things, and this is the last one needed, they may not look at anything until they have everything. Your ability to provide documents on the same day can expedite the process and help avoid delays. You may get frustrated by the unexpected items requested, but that is the nature of the beast when taking out a loan in 2019.
- Avoid New Credit: This should probably go without saying, but it needs to be stressed anyway. If you are getting a loan with a bank you need to make sure your credit profile does not change from the start of the process to the end. Even the slightest change in credit can cause your loan to be rejected. Opening a new credit card may lower your score a few points and pull it under a certain numerical threshold. It can increase your debt obligation which can change your debt to income ratio. There is just too much at stake with your loan to open new credit. Wait for your loan to close, and fund, before you go making any changes to your credit report.
- Quality Attorney: In some states you are required by law to use an attorney for your closing. They may not be very active during the loan process, but they are important before, and during, the closing. They will review all the paperwork sent by the lender a few days prior to the closing. If there are any errors or oversights they will get on them before the final docs are drawn. They will coordinate the closing with the lender and make sure nothing falls through the cracks. They are also the glue that keeps the deal together with the seller and their attorney. As is the case with choosing the right lender, don’t let costs and fees influence your attorney decision.
Pushing the closing back puts the deal in jeopardy and impacts your bottom line. Use these five tips to never miss a closing date again.