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23 Apr 2014
Mortgage problems are the rule, not the exception today. Even with perfect credit and a huge down payment, a mortgage broker is very likely to surprise you with some strange and often ridiculous demands for additional documentation, and these often come at the 11th hour just before the scheduled closing. If you are paying in cash, you can avoid these pitfalls, but if you are planning to get a loan, you might want to be aware of what is happening to almost every buyer. Just knowing what you might experience with a mortgage broker can help to reduce your stress if and when it does happen, and being proactive on these issues can help you avoid mortgage problems and stress.
Mr. and Mrs. Joule made an offer on what they called their final retirement home. The offer was accepted, and since they already had a pre-approval letter and Mr. Joule was retired from a 30+ year career as a police officer, everything looked good and no one was anticipating any mortgage problems with the buyers. First, the out-of-state lender did not know how to address local real estate issues. After weeks of jumping through hoops, the Joule’s were told by that lender that they could not make the loan because there was no private road maintenance agreement signed by all seven homeowners on this private driveway easement. The lender claimed that was required by Fannie Mae. Later it was learned that was not true, and Washington state law specifically addressed that issue for lenders. The Joules turned to a local mortgage broker. I always recommend buyers go with a local lender. [Read What if Your Mortgage Broker is Not Local?]
The second broker is one of the best, but the loan processor his company had working on this file was not. The loan processor, unbeknownst to the rest of us, was not paying attention to any kind of checklist (if he had one), because he kept asking for documentation weeks after he should have, and the closing date had to be extended three times. Some of the requests were ridiculous, and he blamed Fannie Mae. One of the 11th hour lender demands was a letter from Mr. Joule’s police department in California stating that his retirement was guaranteed for at least three years. Strange, especially since he retired about 20 years ago and since the lender already had all the pension documents. In all, various mortgage problems caused about a six week delay in the closing. [Read Mortgage Underwriting Problems]
In another transaction, Fannie Mae required a “Real Estate Certification” at the 11th hour, and demanded that everyone, including buyers and sellers and the listing agent and the selling agent, all sign it. What did it say?
The Purchaser, Seller and Selling Real Estate Agent or the Broker involved in the sales transaction, hereby certify that the terms and conditions of the sales contract are true to the best of their knowledge.
Having been a real estate attorney for 20 years, I can interpret that statement into plain language. Here’s what it says, “Everyone agrees that the contract says what it says, and we all agree that it says what it says.” Does the word “dumb” come to mind for you too? Who is drafting this kind of nonsense? We will never know. Sometimes you just have to laugh and shake your head.
Now you know that such issues can and often do arise at the 11th hour, and you can take some proactive steps to avoid mortgage problems like these (and 100 others). First hire a very credible local mortgage broker. Second, hire a very good Buyer’s agent who has the experience to take you through anything that may come up. At least now you are aware that even with perfect credit, you too could experience some very annoying mortgage problems on your way to closing your purchase.
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