10 common reasons mortgage loans fall through

May 24, 2011 – It’s about the worst that can happen.

You’re getting ready to close on your mortgage loan and you discover its been denied. Here are some of the biggest reasons why this happens.

10. Unrealistic expectations about what the borrower can afford. If there is a question about whether or not you may qualify, you should ask your lender for a credit pre-approval before you begin to shop for a home.

9. Inadequate preparation by the borrower. The more information you have available at application, the more complete the loan officer’s analysis can be.

8. Recognizing that borrowers may need loan terminology explained. Mortgage and real estate jargon are common to those in the industry, but if you don’t know what a term or phrase means, ask for an explanation.

7. Self-employed borrowers may not realize that they are “self-employed”. Keep in mind that ownership of 25% or more in a company or commissioned income often means different loan processing styles and documentation.

6. Government loans with property problems or repair conditions. This means that the question of who pays for the necessary repairs or problems must be settled before you go to closing.

5. Third party vendors who do not deliver on a timely basis. Technology has practically eliminated this situation, but some loans are still held up if documentation is not delivered in a timely manner.

4. Lack of understanding about what happens during the processing, underwriting and closing. Explanation of time frames, documentation and responsibilities of all parties should be discussed so everyone knows what to expect and when to expect it.

3. Credit explanations which are not adequately documented and supported. If there is incorrect information on your credit report, make sure any errors are explained and in line with the dates of delinquencies on the report.

2. Closing funds are not adequately tracked. Be sure your funds for closing are clearly documented on bank statements. Also, gift funds must have donor’s ability to give the gift as well as showing the money going from donor to recipient.

1. Lack of communication. There are many parties involved in a loan closing, and each party must have a complete understanding of what is going on at any given time.

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