6 Common Problems that Can Arise During the Mortgage Process

As the best mortgage lender at the Lake of the Ozarks, it's my job to make the mortgage process as smooth as possible. Unfortunately, there are a few issues that can arise that are out of our hands. Let's take a look at these common issues and how we can try to avoid them during your Lake of the Ozarks home loan process:

1. Home Inspection. 

While it's rare for the borrower to back out of the deal due to something found during inspection, it does happen occasionally. Unfortunately, there's not much the lender or real estate agent can do if there's an unfixable problem with the property. Many times it's something that could have been disclosed early on, but wasn't. The best way to avoid any issues like this is to ask the seller a ton of questions during the beginning stages, to ensure everything is disclosed as early as possible during the transaction.

2. Appraisal Valuation.

Another common issue that can come up is if the home is appraised higher or lower than the valuation in the initial offer. This problem is much less likely to occur in popular markets, and typically only comes up when there aren't comparable sales. If you're in the market for a 4 bedroom, 3 bath single family home you shouldn't have this issue. It mainly occurs when you're in the market for a million dollar home, which is harder to find something to compare it to.

3. Application Issue. 

While some loan closings are prevented due to the actual property, more often than not the issue arises from the loan application. Sometimes the documentation doesn't match the information provided on the original application. One common error on the application is the amount of qualified income of a self-employed borrower. The income listed on the application needs to match what is listed on the borrower's tax return. Obtaining a pre-approval is a great way to avoid some of the application issues that could arise later in the game.

4. Tax Deductions. 

As stated before, the income on the application has to match what's listed on the tax return. While it may have seemed like a great idea to take all those deductions, when it comes to applying for a mortgage that's not always the case. You can't just add those pieces back into the amount of income you make. You have to go off what your tax return says, whether you actually made more than that or not.

5. Borrower's Credit. 

One of the main issues that can arise during the underwriting process has to do with the borrower's credit. If the borrower has a bad track record for repaying money loaned, the underwriting is going to find that out. The borrower's credit history will be thoroughly gone over and the underwriter may even contact past or present creditors. In addition to credit history, the underwriter is going to look at the borrower's debt-to-income ratio. If the borrower has too much debt relative to their income, problems will arise during the underwriting process. The debt-to-income ratio is one of the most important factors in mortgage underwriting.

6. Bad Timing. 

Mortgage loan closings can also fail due to timing issues caused by last-minute changes. These seemingly simple changes could require the lender to issue a new disclosure statement, therefore delaying the closing. If the seller included a contingency that the closing must occur by a specific date, such delays can be problematic for both the buyer and the seller. Another timing issue can occur when the borrower does something to alter his or her financial standing. Buyers should avoid making any other large purchases or switching jobs until after the closing has occurred.

The best way to avoid these problems is to disclose as much information as you can from the beginning, even if you think it might not be necessary. It's better to disclose too much, than not enough. Be sure to ask your Lake of the Ozarks mortgage lender and your real estate agent as many questions during the beginning of the process and make sure to get a pre-approval before moving ahead with an offer on a house. If you're considering purchasing a home at the Lake of the Ozarks in the near future, give me a call at 573-746-7211. 

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Michael Lasson

Sr. Residential Mortgage Lender

NMLS #: 493712

2265 Bagnell Dam Blvd, Suite B

PO Box 1449

Lake Ozark, MO 65049

Direct:  (573) 746-7211

Cell: (573) 216-7258

Fax:(573) 693-9141

Email:  mlasson@fsbfinancial.com

**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.