When you submit a mortgage application, your lender approves you for the loan on the basis of the information that you provide. Once the mortgage process begins, the lender can cancel the loan if any issues emerge related to the home being used as collateral or your ability to repay the loan. It normally takes between 30 and 60 days to process a loan, and a problem that causes the mortgage to fall through can arise at any time.
As part of the mortgage underwriting process, your lender hires a real estate appraiser to determine the value of your home. If the appraisal comes up short, meaning your proposed loan amount exceeds the property value, you cannot proceed with loan. Additionally, if you are applying for a loan insured by the Federal Housing Administration, the appraiser must report any safety issues, such as loose wires, that he uncovers during the process. If the current owner and you cannot reach agreement on fixing these issues, the loan will fall through because the FHA only approves loans once all safety issues have been rectified.
You are not required to order a home inspection, but many prospective buyers order one before finalizing on a home purchase, as a home inspection involves a state-certified inspector conducting a detailed examination of the property. Sometimes issues such as mold, termite infestation or sink hole damage emerge during home inspections. These issues are often hugely expensive to remedy and many homeowners and lenders refuse to move forward with purchases when these kind of problems emerge.
Most lenders can only include verifiable forms of income in your mortgage application. This means if you cannot substantiate your income by providing tax returns, W2s or evidence of employment, your lender will decline the loan. Lenders normally verify your employment by contacting your employer during the early days of the mortgage process. However, many lenders contact your employer for a second time just prior to closing on the loan, and if you are no longer employed, the lender can cancel your mortgage.
If your mortgage process takes more than 45 days, your lender normally checks your credit report for a second time. If your credit score has fallen below the minimum acceptable level, then your lender can decline the loan. Other issues that can cause mortgages to fall through include evidence of unpaid liens on the property that are uncovered during title search. Damage caused to a home by a storm or natural disaster can also make a property ineligible for financing.
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