Financial Facts: Warning: even approved mortgages can be denied
Special to the Daily
Each and every time I receive an approval from a mortgage lender on a client I sit and wonder if the loan will close without a problem. By a problem I mean will the lender decide to require additional information from the potential borrower, additional information from the appraiser or even the title company. Yes, even after an approval is received deals can go bad.
The number one reason real estate mortgage deals go bad is that the potential borrower does something that causes the overall financial conditions to change, and the lender backs away from the deal. As an example I had a borrower who had a $1,000,000 condo under contract. The borrower neglected to inform me that right prior to the real estate closing he was retiring, thus his earned income would stop. Two days prior to the closing, the lender contacted the company my borrower worked for and they were informed that he was on vacation but would not be returning as he would be officially retired. At that very moment the loan approval was overridden and the deal stopped.
Fortunately the borrower, a medical doctor, was the founder of the clinic and was to receive a substantial income from the sale of his share of the business and he had a seven-figure retirement account. This deal was finally closed but this is an exception to the rule.
As a borrower/buyer, be sure to do and not do a few things while the mortgage process is ongoing. The number one thing to not do is getting fired from your job. If your income suddenly stops, underwriters have a tendency to stop the mortgage from going forward.
Now if you do have a job change during the mortgage process, please make the change in the same job field and for more income. If this does occur, the underwriter may want a letter of employment or may even postpone the closing until one paycheck is received and reviewed by the underwriter.
Another thing for you, the home buyer/borrower, to not do is go out and buy any major item such as a vehicle, boat or snowmobile. Underwriters like to see some restraint prior to the closing of the deal. After you sign the paperwork and get the keys to your new home, go right out and buy what ever you can afford but not prior to the closing.
Finally, and maybe most important, do not falsify any bank, stock or tax documents. I do know of a real estate closing where the buyer/borrower actually admitted that the tax documents were doctored so the figures would look good. The title company immediately stopped the closing and the potential borrower lost the property. But more importantly the buyer/borrower was saved from jail time. Falsifying documents is a no-no and he could have ended up in jail and having the mortgage note called immediately.
So live a boring financial life during the mortgage process and you will have a better chance of not have the approved loan denied at the closing.
For answers to your mortgage related questions call Bob Kieber at (970) 485-1312 or email him at robertk@mymillen niumbank.com. Bob is a local mortgage lender with Millennium Bank. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country.
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