|This month, we are going to focus on some of the common issues I see pop up that could delay a closing on the purchaser’s side in a real estate transaction. Next month, I will dig into the seller’s side, so stay tuned! |
Not enough money for closing costs. If you’ve purchased a house, you know closing can be expensive and depending on when you close, there could be additional taxes due that you haven’t planned into the budget. Property tax is a big one. The amount is entirely dependent upon when you close. You could be required to come up with 8-10 months of real estate taxes to pay to the county, the seller and the lender for escrows. This could amount to thousands of additional dollars, so ensure you have the funds available to you and are ready to pay. For example, if you closed tomorrow, the title company would have to pick up the first ½ taxes (Suffolk) to pay the taxes that are due by December, you would have to reimburse the seller for the remainder of time through 11/30/21 and then the lender would require at least 3 months’ escrow. So you are looking at 10 months of taxes. Not having enough money saved will delay your commitment or even the clearance to close until the bank can verify that the money is in your account.
Paperwork issues. A buyer typically has 45 days to get a mortgage commitment. If you are in a hurry to close, it could be difficult to process the loan quickly if your financial paperwork isn’t submitted fully. Usually, a lender is looking for two months’ worth of bank statements, pay stubs, tax returns, information from 1099s, profit and loss statements, business banking statements, etc. Everyone’s finances look different. Getting your paperwork in order and ready to present to a lender even before you start looking for a new home, really helps the process run smoothly.
Spending large amounts of money. Once your offer has been accepted, it’s important not to take out loans or make any major purchases, such as buying furniture, getting a new car, co-signing for someone else, etc. Your debt to income ratio will be too high and all of a sudden you might not qualify for a loan anymore, especially if your interest rate is higher than you expected.
Not managing expectations. There are many moving pieces in any real estate transaction, especially if both parties are selling and buying. Understand all the terms and ask if you don’t understand something. Contingencies, hand money, on or about closing date, etc. Your closing dates will need to be as close as possible if you are buying and selling a home, otherwise you could end up in a hotel. The best way to stay on track is having people that know the process on your side and can work with you through the ups and downs.
Not responding quickly. A loan officer, your attorney, your real estate agent. There are many people involved in this process. If you take days to get back to people, it affects everything. Keep your team up-to-date if you are traveling in case something comes up and they need to contact you. Respond to emails, texts and calls in a timely manner. Don’t put in an offer and then leave town. Be available and it’s a lot less stressful.
Locking in your rates too soon. If your interest rate expires, it can be a big change in your plan. Let your attorney know up front, so they can work to get the house closed by the right date. Talk to the seller and see when they are really ready to close. If they aren’t in a hurry and you are, it might not be the best home for you.
Waiving an appraisal. If you do this and the appraisal does not match what the lender needs it to be, you better have extra cash since the loan won’t cover the costs. (See last month’s newsletter for more details on this.)These are just a few of the issues I have seen in my experience. The main thing to think about is being prepared. Everything you can do in advance, do it. And have the support you need around you so you understand the process and feel confident in your purchase. Buying a home is exciting and a new chapter, but comes with its own set of challenges.