When someone submits a loan application and provides the necessary documentation, it can get a little quiet from the borrower’s perspective. So much so sometimes that they get a little concerned. What is the lender doing? How come no one’s contacted me for several days? Should I be worried? On the contrary, once a loan application is submitted and documented, the wheels really begin to turn. It’s just that the lender doesn’t reach out every time an action has been planned or completed. That said, of all these actions, what is the most important one lenders must absolutely do? Let’s take a look.
One of the very first things a lender does is ‘ordering out.’ This means contacting various third parties to produce the necessary documentation needed in order to present a complete loan file. An appraisal is ordered. Title insurance is ordered. An attorney is contacted for states that use an attorney to hold a closing. Credit reports are ordered. If the loan package is missing any documentation, the lender reaches out to fulfill the needed items. There’s a lot of action going on behind those curtains.
Okay, so of all those actions, which one is the absolute most important? There is indeed one, but it’s one of the final actions lenders take when it’s getting close to close on a home loan. The answer? Getting the loan papers to the settlement agent on time.
That might strike a ‘well duh’ moment but it’s a fact. Think about that for a minute. If the close date is on the 30th, but the papers aren’t delivered until the 1st of the following month, what can happen? The sales contract will clearly state the closing date and that’s the date the lenders use. Sometimes things need an extension but the borrowers must make the request. It’s not automatic. Being late throws a wrench into the process, or worse.
For instance, let’s say the lender says it’s going to be a few days late with the closing papers. That might mean another offer can come in, usurping the previous offer. The lender loses the deal but most importantly the buyers lose the home.
The same applies to interest rate locks. If the lender is late there runs the possibility the interest rate lock has expired and rates have gone up in the meantime. Rates can move up to the point where the borrowers no longer qualify.
So, is getting the papers to closing on time the most important action of all? You bet it is.
