Allowing Enough Time

Test your knowledge of the residential mortgage process, and answer the following question:

For lenders underwriting a mortgage, what is the key date in a transaction?

A. When the Purchase Agreement is finally accepted (it’s officially a “done deal”).
B. When the Inspection Contingency is removed.
C. The Written Statement deadline specified in the Financing Addendum.
D. Closing.

Answer:  “B.” (credit given for “C.” and “D.”).

While all of the above dates are important, arguably the most important from the lender’s perspective is when the deal is past inspection.

It’s only at that point that the lender kicks (back) into gear, ordering the Appraisal and resuming the underwriting process that began by initially qualifying the Buyer and issuing a Pre-approval Letter.

Next Deadline:  Written Statement

What can make things tricky is that the next key financing deadline — the Written Statement date, when underwriting must be completed and the Buyer’s earnest money becomes non-refundable — is defined at the beginning of the deal.

So, if the sale subsequently bogs down over inspection issues, suddenly the lender doesn’t have 30 days to complete underwriting — they may only have 10-15 (not nearly enough).

Which is why a good Buyer’s agent:  a) consults with the lender up front about their required processing timetable; and b) estimates, conservatively, how long it will take to get past inspection, then picks a Written Statement deadline a month (at least) past that date (answer “B.” in the multiple choice question above).

(Too) Cheap Mortgages

What makes a Buyer’s agent (very) nervous?

Working with an out-of-state (or online) lender who knows none of the above — and is hard to reach, to boot.

As I tell my Buyer clients, a cheap loan ain’t worth it if costs you the house (due to missed deadlines) and/or gets you sued (for breach of contract).

And good luck getting the earnest money back if the deal blows up due to 11th hour lending “issues.”

See also, “‘Good Lender Service,’ Defined”; “Why Good Lender Service Matters”; and “The Opposite of ‘Guilt By Association.‘”

And: “For Sale at Costco: Bulk Detergent, Flat Panel TV’s, & Mortgages (Mortgages?!?)”; “Tie Breaker in Multiple Offers:  the Buyer’s Loan Officer“; and “The Second Most Important Date in a Home Sale.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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