Mortgage company responsibilities
When you are obtaining a mortgage for the purchase of a home, your lender has certain responsibilities and deadlines. Once you are under contract, you, as the buyer, must apply for a loan within seven days. The lender, in turn, is contractually obligated to not delay the process, including arranging the appraisal. Often, lenders will hold off on ordering the appraisal for purchases that have home inspection contingencies. Understandably, they don’t want to pay for an appraisal if the transaction isn’t going to come to fruition. Unfortunately, they are still required not to delay it. So be sure your lender understands that they can put you, the buyer, in default, if they do.
Another deadline that lenders sometimes don’t take seriously is the mortgage commitment date. There is a line on the Agreement of Sale that stipulates when they must supply a document stating that they have done their due diligence and have committed to funding your loan. Again, if it is not in on time, the buyer can be found to be in default, which means the seller can terminate the transaction and “kick out the buyer”.
As closing approaches, federal law states that the lender must provide the buyer with a Closing Disclosure a minimum of 72 hours prior to closing. This document itemizes all charges and fees the buyer will have to pay at closing. If this document is not delivered within that time frame, the closing must be delayed. A delay in closing can be anywhere from inconvenient to nearly catastrophic. Consider what happens when a seller is planning to use the funds from the proceeds of a sale to purchase his next home that same day. We call these “back-to-back” settlements and they are popular because they allow the seller to avoid having to find temporary housing. They move from their old into their new house within the same 24 hour period.
With a delayed closing (which lenders sometimes cause, even when the CD has been delivered 72 hours in advance), there can be moving company fees for additional storage of furniture, pet fees, hotel fees, airline changes, etc. There is emotional stress and a logistical mess, in many cases. People have work and personal commitments that are not always easy to reschedule.
Lender accountability/repercussions
When you realize how many ways/times within the transaction the lender has the capacity to negatively impact the transaction, you will understand why I suggest overseeing their progress. If they make a signficant error, it is they buyer who will suffer the consequences. Again, not only can there be considerable inconvenience, but substantial cost as well.
This fact brings me to my “beef” against the mortgage industry: the lender faces no repercussions if they make mistakes that put the buyer in default/delay the closing. They are not accountable to anyone. They have no financial or other penalties. So, unfortunately, their incentive to be on top of all the deadlines and everything else they are supposed to be doing is not particularly strong. Note: there are some incredibly conscientious mortgage professionals out there (and I have one whom I recommend because he is the epitome of this rare breed).
Most buyers don’t necessarily have a relationship with a specific lender prior to when they decide to buy a home, so it’s more likely that you won’t know the professionalism of the person you’re dealing with. So I advise you to be proactive instead of waiting until there’s a problem. Remind them of the contract deadlines and check in with them frequently to make sure they are on track.
If you are relocating to the Philadelphia/Main Line area, please go to my blog page and search for posts using the relocation tag. Contact me to discuss your Philadelphia area relocation! jen@jenniferlebow.com/610 308-5973
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