Mortgage Advice

Closing on a Home: What Could Delay the Process?

August 14, 2014

When it comes to buying a house, there’s no such thing as being too prepared. But, no matter how much research you do ahead of time, or how carefully you’ve planned, there are some things you can’t prepare for—especially when it comes to closing on a home.

Despite your due diligence, there may be situations outside of your control that could delay your closing date. Here are seven issues that commonly arise during the closing process and how to handle them:

  1. The property isn’t up to par. If you’re buying a fixer-upper, this factor may come into play. While you may be fully aware the house you are buying is in need of a little TLC, it’s important to make sure the property meets the structural standards outlined by your loan program. If these requirements are not met, repairs will need to be completed before you can proceed with closing. Although these types of requirements are more common with government loans, such as FHA or VA loans, it can also occur with conventional loans. Ideally, all repairs should be discovered during the home inspection, negotiated upfront and included in the purchase agreement.
  2. The appraisal comes in low. If the house appraises below the purchase price, it can delay the closing process. In order to approve your loan and proceed with closing, the mortgage lender must ensure the value of the home supports the loan amount. In this situation, additional data may need to be provided to the appraiser, or a second-appraisal may even be ordered. Either way, this will inevitably extend the time it takes to close. Depending on the final outcome, the buyer and the seller may negotiate a new purchase price, or the underwriter may deny the loan if the home does not appraise at value.
  3. Additional documentation is requested from the underwriter. Before closing day, the underwriter may check your credit one last time or request additional documentation, such as your most recent paycheck, an updated bank statement or your final homeowners insurance policy. If additional financial factors, such as child support payments, a previous bankruptcy or alimony are discovered during the underwriting process, your lender may request additional documentation—don’t worry, this is a normal part of the mortgage process. To ensure the closing process remains on track, provide your lender with the necessary paperwork as soon as possible.
  4. Issues are discovered during the final walk through. A few days prior to closing, you will be encouraged to take a final walk through of the property. Use this time to inspect the house and make sure everything included in your purchase contract is accounted for. Are there any repairs that still require completion? Do the appliances work? Make sure everything functions properly before signing your name on the dotted line. If you discover issues during your final walk through, work with your realtor to negotiate the issues in question before you close on the home. Once you sign the dotted line, those issues will be yours to take care of, as opposed to the seller’s responsibility to repair. Yes, this will delay the closing, but it will be worth it to have a move-in ready home that meets your standards.
  5. The title search discovers a previous lien on the property. Before closing day, a title search will be performed on the property. If the seller was involved in a previous legal situation wherein the property was used as collateral, such as a previous bankruptcy, there may be a lien on the property. Until proper legal action is taken, this will delay (or even derail) your ability to buy the home.
  6. There are other issues on the seller’s side. In addition to bankruptcy, there are other legal situations that could potentially stall your closing. Probate issues could arise if family members are selling the home on a deceased seller’s behalf. If the seller is in the middle of a divorce, this could also affect your ability to purchase the home.
  7. Unforeseen natural events cause damage to the property. Although this scenario is unlikely to occur, there could be natural events that cause damage to the property between the time you enter into contract and the day of closing. If there is a dangerous storm or flash flooding in the area when your new home is located, the underwriter may require an appraiser to confirm the property wasn’t affected as a result. This is another reason why it is important to do a final walk though of the property and ensure the home meets your standards.

As you approach closing day, it’s important to remember there is no guarantee you will close on time. While many of the above-listed factors are extenuating circumstances outside of your control, it’s always good to be prepared and have a backup plan in place. The best thing you can do is work closely with your lending and real estate team. If you have a great lender and realtor representing your needs, they will do everything in their power to help you handle unforeseen surprises throughout the process.