Imagine this. You’ve been shopping for a house for a couple of weeks and finally found your ideal home. So you apply for a mortgage and don’t see any way you won’t get approved. After all, you have a decent credit score, a good credit history, and you have taken a loan with this lender before.
You get the house for a reasonable price, and as you close the deal, you get a phone call saying that your application is going through a delay, or even worse, it was denied.
How does this happen?
Surprisingly, pre-close roadblocks are very common. They come in various forms, such as your bank disagreeing with the price you negotiated or finding something wrong with the house.
Either way, if things break down during pre-close, you might think there is no way to fix things, but you would be wrong!
There are ways to avoid pre-close roadblocks before they happen, and there are even some ways to get around them.
Try to Avoid These Credit-Related Roadblocks
Many pre-close roadblocks are commonly credit-related, and the majority involve you changing your credit in some way, shape, or form. So, here are a couple of ways to prevent your mortgage application from being stalled or even denied.
- Opening or Closing a New Line of Credit
If you open or close a new line of credit while being considered for a mortgage, it will stall your application, thus making you wait even longer to purchase a home. To keep your credit in good standing, avoid opening or closing lines of credit.
- Not Paying Your Bills
If you have a lot of credit, you want to make sure you are paying all those bills on time, so your credit score does not go down. However, doing so will result in your application being stalled and possibly rejected if the decrease in your score is significant.
- Buying a Big-Ticket Item
Buying a big-ticket item is a huge no-no. For example, if you purchase a boat, car, or anything equivalent to that amount, you are putting yourself at risk of rejection. You might think this is no big deal, but your lender will not see it that way. Because when you assume a new form of debt, your debt-to-income ratio goes up, and your lender has to reconsider if they want to accept your new debt on top of the amount you will owe them. As such, avoiding these big purchases is best until you close your mortgage.
Other Common Roadblocks
Not all pre-close roadblocks are credit-related; in fact, some of them have to do more with the house than you have to do with you. Here’s a handful of common pre-close roadblocks that are specifically related to the house and how you can get around them.
- Finding Issues with the House
You might be in the final stages of closing the deal on the house you want, but then on the final walkthrough, you spot some glaring issues you didn’t notice. Then, it’s up to you if you wish to buy the house in that condition, demand the seller fix the problems and then purchase it, or go back to home-hunting all over again.
Solution: Inspection Clauses and Vigilant Walkthroughs
Always ask for an inspection clause in your contract, so if an inspector finds anything wrong with the property, you are not legally obliged to give up your earnest money.
On your walkthroughs, try to spot any potential issues the property might have before making an offer.
It’s best to familiarize yourself with common issues houses have before doing any walkthroughs.
- Not Passing the Bank Appraisal
You might have put down an offer for a house that you love, and the seller might have accepted it. But the bank says the price you are willing to pay for the home is much higher than what the house is worth. But don’t worry. There are a couple of ways to work around this.
- Solution: Make Up The Difference
If you want the house and are willing to pay a little more for it, you could make the difference from what the bank will lend you. That means on top of your down payment, you will also make up the amount the bank or lender did not want to give you.
- Solution: Negotiating For a Lower Price
Now you may or may not be a fan of this solution. After all, you just went through a couple of rounds of negotiation to get this far. But your best option is to work with the seller to negotiate a lower price. Often, sellers are seeking a quick close too!
You Might Face Other Roadblocks
These few roadblocks are by no means the only roadblocks you will face during a pre-close, but they are the most common. As such, you want to ensure that you are watching out for these roadblocks and do your best to avoid them or work around them.
Make sure you’re doing what you can to get the best deal possible by keeping your credit in good standing and avoiding changing your credit while your application is processing.
Finally, watch out for any issues when trying to close a house. Happy home-hunting!