How to Avoid Loan Approval Delays or Denial

Congratulations! You finally found your clients the home they’ve been dreaming about. You made a bid

and had it accepted. Your buyer has met with their Loan Officer, completed the mortgage application

and the loan approval process is underway. Everything is looking good, the closing is only weeks away

and even though you’re hesitant to allow yourself to get excited, you’re secretly doing the happy dance.

It's smooth sailing from here, right? Probably. However, in an industry that feels like a continuously

moving target, it’s not always easy to recognize what the next potential pitfall for our clients might be. So

here’s a little “old school” advice on how to advise and guide your clients through the treacherous waters

known as today’s real estate transaction:

Tips to Avoid Loan Approval Delays or Denial

Don’t: Allow multiple credit checks

Depending on your client’s credit score, 3 points could make the difference between approved and

denied. One additional credit pull might make that difference.

Don’t: Take out any new debt

This seems like one of those “are you kidding me???” moments, but the truth is we’ve seen this delay or

even derail a closing more times than we care to admit. Let’s face it; the temptation to buy is strong when

there are so many exciting purchases to be made for that new home. Everything from appliances to

furniture can lure your clients into a decision they should have waited to make.

Remember: We will re-pull credit just prior to closing and if a new debt appears, it could potentially

be fatal to the approval.

Don’t: Change Jobs

Encourage your clients to hold off on accepting that new job offer until they’re closed. While this isn’t

necessarily a deal killer, it can be a deal delayer. One of the factors mortgage companies consider is the

length of time they’ve been with their present employer and as you can imagine, they are partial to

stability. At the very least, changing jobs initiates the need for more paperwork and additional

verifications.

Do – File tax returns and/or extensions

We will require copies of transcripts from the last 2 years

Do – Explain or documents all inquiries on your credit report

The key piece here is that NO new debt has been established. I know it seems like were beating a dead

horse, but it’s THAT important!

Do – Disclose all Debt: Even if it did not show up on the credit report, make sure it’s disclosed to the

lender. Believe me - they will find out eventually and it's always better to catch it early in the transaction.

Do – Work with a knowledgeable lender

It might feel like a shameless plug, but the truth is, working with a knowledgeable and educated

lender is critical. If your Loan Officer can’t navigate your client through the loan process and easily

identify potential problems, you might end up delayed or worse – denied.

More than one buyer (and real estate agent) has had the wind knocked out of their sails at some point by

making a few of the mistakes I described above. These are just a few tips to help you avoid surprises, or

worse yet, a rejected loan just days before closing.