Real NEastate: Hassle from the mortgage underwriter

Q: I am buying a home in Bells Corner, and I’m supposed to settle this Friday. My mortgage lender is telling me now it might not happen on time. She said the underwriter needs more paperwork, and I might even need a co-signer. I was pre-approved and have given everything they’ve asked for, why do they need more two days before closing?

A: More and more I have seen missed settlement deadlines and underwriters asking for more information and taking longer to review files. Getting mortgage loans in time for settlement has definitely been a nail-biter lately. I advise my clients to make sure all their paperwork and verifications are in as early as possible so the lender can do their job.

“We used to see ‘rush closings’ where the mortgage documents got sent to the underwriter for review in the morning in time for closing in the afternoon,” says Stan Reinford from Superior Home Mortgage. “Documents now need to hit the mortgage underwriting department at least five days prior to closing.”

Tighter lending guidelines have been imposed, and loan underwriters need time to make sure all your t’s are crossed and i’s dotted. Fannie Mae, Freddie Mac and the other investors who are buying loans have absolutely no tolerance for defects. Examples of defects could be: a missed signature on a contract, a missed signature on a client’s tax return or missed verification of account balances. If there are defects, the loan can expect to be postponed for at least a day or two.

A co-signer is needed in most cases to help the buyer qualify using the co-signer’s income. A co-signer or co-borrower is someone who does not live with the buyer. The only loan that will allow “Non–Occupying Co-Signers” is an FHA loan. I am not sure why they are asking for your co-signer so late in the game, but if you do need one, don’t expect to make settlement this week.

Stacey McCarthy is a real estate agent with the McCarthy Group of Keller Williams. Her Real NEastate column appears every Wednesday on NEastPhilly.com. See others here. Read other NEast Philly columns here.