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The process of obtaining and closing on a mortgage involves many steps and is dependant on many individuals doing their job properly and in a timely fashion. By being aware of the order of the events and being conscious of the fact that problems can arise at any point and for any reason, you will be able to minimize the impact of any issue that arises.

It took weeks, maybe months, to find the home you wanted. Negotiating and then getting the purchase into contract took days, perhaps weeks. You start the mortgage application process and before you know it you are approaching a closing date. The timeframe to get the final pieces in place has shrunk to a matter of hours. To help reduce or even eliminate your stress during this process, just follow these simple recommendations:

Lets begin by recognizing 2 basic facts. First, the entire process of finding a home and closing on it involves many people. Some you will deal with directly, such as your attorney. Others you will deal with indirectly, such as the lender’s underwriter. As human beings we are not perfect and therefore mistakes will happen. Your role is to try to avoid creating the opportunity for a mistake to happen and be alert to clues that something is going wrong. Second, we live in an era of voicemail and “hold” buttons. Communication between all parties involved is extremely time intense. Just as in your work environment, days can easily go by in your attempt to talk to someone as you both leave messages back and forth on each other’s voicemail. So, don’t wait until the last minute to respond to questions that may arise or supplying supporting documentation that is requested. Above all, be patient with people. They need time to do their job.

You’ve found the house you want to buy and have settled on a price. You’ve contacted the attorney you have chosen to represent you and he makes contact with the attorney representing the seller for the purpose of getting the contract drawn up. The days of a “sit down” contract have long passed. It is a rare occasion that all parties and their attorneys meet in the same office and “sit down” to work out the details of the contract. Once the seller’s attorney draws up the contract, it’s sent to your attorney, details are discussed between them over the phone. It then gets forwarded to you for signature. You sign the contract and your attorney sends it back to the seller’s attorney along with your down payment check. The seller’s attorney then has his clients sign the contract. Only at this point are you actually in contract to buy this property. As I pointed out earlier this may take anywhere from several days to weeks to get done.

While waiting for the signed contract to be returned, you should have begun the mortgage application process. Why? Because you are taking advantage of this time to meet with your mortgage consultant, get the necessary paperwork completed and assemble the required supporting documentation. The intention here is to have your file ready to be processed so that once the contract has been fully executed the mortgage process can start immediately. Starting early affords you additional time, if needed, to assemble the paperwork.

It is not uncommon for questions to arise regarding your application. When your consultant relays the issue to you, try to understand what concern generated the question. Only then can you address the problem. Don’t take these questions personally and get defensive. Remember, the lender is not only confirming the strength of your application package but is also protecting itself from fraud. The additional documentation requested, quite often is for the purpose of confirming the integrity of the package; you are whom you say you are, that you have enough of your own personal funds in the transaction and your income as presented is verifiable.

Two to three weeks pass from the time the contract is executed, the appraisal of the property is completed and the mortgage commitment is issued. You will need to sign it and return it with whatever conditions that are noted on the commitment. If your attorney hasn’t ordered the title search to be done on the property as yet, he will do it now.  Most attorneys will wait for the mortgage commitment to be issued before ordering this search. However, some do it immediately on signing the contract. Why? For the same reason that you started your mortgage application early. Should an issue arise it gives the seller and his attorney more time to address it. This reduces the chance of the closing being delayed. It would be a good idea to discuss this timing issue with your attorney. If you or he feels that there is a potential problem the search will reveal (such as an undocumented extension to the home), then you may want to encourage that the report be ordered earlier rather than later.

Before returning your signed commitment you must confirm that the commitment is for the loan amount and product you applied for. If you have already locked in a rate, the commitment will confirm it. You should also make a note of the date the lock-in expires as well as the date the commitment expires. They probably will not be the same date. The lock-in expiration is determined by the date you locked in and for the number of days you chose to lock for. The expiration date for the commitment will be determined by when your documentation expires. Every document submitted is date sensitive. Most are only good for 90 days and then they need to be updated. So by simply asking what paperwork is expiring you can be prepared to update when necessary, should the need arise.

It’s important to remember that any changes you make at this point will require your file to be reviewed again by the underwriter. If you elect to change loan product, have changed jobs, moved large sums of money through your bank accounts or ran up your credit card balances prior to closing, your file will require a new underwriting review. If the change negatively impacts your quality as a borrower, you could lose your mortgage commitment. Quitting your job without having been rehired somewhere else would be an obvious reason to lose your commitment. In most cases, all you need to remember is that you need to give the bank time to review whatever changes that have occurred. Waiting till the last minute will jeopardize your closing date. If you “forget” to notify the bank of change in your financial situation, you run the risk of the bank discovering it as they finalize your closing package. Since the final verifications are done just prior to closing, you will definitely have to postpone your closing. 

Before closing you will need to have fire insurance issued for at least what your commitment calls for as well as a paid receipt for the upcoming year. The insurance policy needs to identify your new lender as the first mortgagee in the form that the lender requires. Typically, the proper wording is in the mortgage commitment, but not always. You may have to ask your mortgage consultant for it. If you plan on pricing out several companies, give yourself time to do it. Some companies can issue the policy, or a binder, right on the spot. Others can’t and need a few days to get it issued. All will want some specific details about the property. The easiest thing for you to do is to ask for a copy of the appraisal report. Anything that your insurance broker will need can be read right off the report.

You will probably need to bring money to the closing. Certified funds are required, so give yourself enough time for funds moved into you checking account to have cleared, so you can draw against them.

Exact closing figures are usually not available until the last minute. If this is the case, then you can work off the estimates given to you by your attorney and your mortgage consultant. Remember the lender doesn’t bring a check for the full mortgage proceeds to the closing. They bring a checkbook with a net balance of the proceeds. This is the amount of the mortgage less any bank closing costs. This impacts the amount of funds you need to bring and also gives you flexibility in your certified checks. By giving more of your personal funds directly to the seller you will have the ability to direct the remaining funds from the mortgage proceeds to cover your title charges, etc. After all the figures are finalized there may be remaining funds in the mortgage proceeds account, then a check is cut back to you. If you’re short of funds, then your personal check can be used to make up the difference. The important thing to remember is that you need the estimates to be reasonably accurate. Being off by thousands of dollars, either way, will make for a complicated closing so you want to work with the most accurate figures available.

If you are purchasing a condo, the only difference is that instead of obtaining your own homeowner’s you need to have the lender added to the condominium’s master insurance policy. In a condo, your homeowner’s insurance is part of your common charges.

A co-op purchase is a little more involved. Once the mortgage commitment is issued you will also receive 3 copies of the “recognition agreement” (This document recognizes all parties involved in this property. You are the stockholder with ownership rights. The lender has been granted foreclosure privileges in the event of you defaulting on the mortgage. And the cooperative corporation having similar foreclosure privileges should you default on your maintenance payments.) The agreement needs to be signed by you, the lender and the board of directors of the co-op.  In addition to obtaining lender approval of your mortgage you then need to get board approval of your purchase. You will need to obtain a copy of the co-op’s application package, complete it, just like the lender’s application package. Supply the necessary documentation along with your commitment letter and the recognition agreements to the management company for the corporation. After their review they will then arrange for an interview with the admission’s committee of the corporation. It’s only after you are approved by this committee will you be able to arrange for the closing of your purchase. Because of this added step be prepared for an additional 4 to 6 week delay before you will be able to schedule the closing.

The last item you need to be aware of is how the lender secures its interest in the apartment. Unlike a house or condo, no deed and mortgage is filed for a co-op. Since your ownership interest is that of a stockholder a lender takes possession of the actual stock certificate as well as your proprietary lease. (The stock certificate is your ownership interest and the proprietary lease gives you the right to occupy the physical space identified as the apartment unit.) If the seller of the apartment has financing on the unit, his lender needs to be contacted by either the seller or his attorney. The timing of your closing is totally dependent on when the request is made and how efficient his lender is in finding those documents and arranging for them to be brought to the closing.

In knowing what to expect in the process, being aware of all the steps involved and being prepared to respond to issues in a timely fashion you will ensure a smooth transition from tenant to homeowner.