5 Things that Can Delay the Closing of a Loan

Closing a loan can take a few weeks to a few months. Since home loans are larger debts, they typically take more time to move through the processing phase. It should not take more than a couple of months to get a mortgage loan approved. There are some exceptions that can slow down approval and closing. 

#1 Incorrect Information

The number one item that slows down mortgage closing is incorrect or inaccurate information. Before you submit documents, review them for accuracy. If any supplemental materials are needed, such as proof of income, ensure these are enclosed with the application prior to submitting the documents to speed up the process. 

#2 Bad Credit

Good credit borrowers will find lenders are more willing to compete for their business. As a result, lenders will want to process the loan quickly before the customer goes elsewhere. On the other hand, borrowers will be the ones competing for loans if their credit is low. Know your credit going into the loan process. If you have bad credit, allow for more time to close a mortgage instead of opting for a very quick closing in any home you bid on.

#3 Low Income

The size of your mortgage is affected by the size of your income. Having low income is not in itself a problemas long as your income is large enough to support the loan you are seeking. If the loan is slightly over what would be considered a reasonable budget for your income, though, it can take much longer for the closing to occur. This is particularly true if your income is not stable. For example, borrowers who have just started a new business or work for themselves may see some delays in the closing of their mortgage loan.

#4 Criminal Background

Your lender will check your credit score first, but the lender may also run a background check on you. A background check can reveal items like bankruptcies that no longer show on a credit report because they are past the statute of limitations. They will permanently be on a background check, though, if they entered a court. During this process, if a lender turns up a criminal background, they may think twice about funding your loan. This of course depends on the offense. If you have a history of fraud, theft or other issues hinting at dishonesty, though, expect your lender to investigate these items before moving forward. 

#5 Tax Liens

Federal debt is the most senior debt on any record. If you have a tax lien against you, this lien will be paid off before any other debt if you declare bankruptcy. In fact, the IRS can seize your property to pay off the loan even if your mortgage is in good standing. Because of this, mortgage lenders will not want to loan to a person with an active tax lien. Your lender will investigate this issue thoroughly to determine the risks it poses to the loan prior to moving forward with closing.