The moving truck is full, the kids are already in the car, and you are waiting not-so-patiently to sign the mound of closing documents for the mortgage on your new home. Then, bam: The settlement agent tells you the lender isn't going to get the papers delivered on time.
The closing has to be delayed.
Now you're stuck paying not only for the moving van, but also for storing your household goods somewhere. Worse, you've already given back your apartment to your landlord, or closed on your old house, so you have to find somewhere to live until you can close on the new place.
Even worse yet, since you won't meet the deadline to close on the house you're buying, the seller may get antsy. So antsy, in fact, that he may declare your deal null and void and sell the place to someone else.
All of these scenarios are possible these days, because closings are taking longer then they used to. The reason: Many lenders are still having trouble coming to grips with new federal "Know Before You Owe" settlement rules that went into effect in October.
Lenders and their vendors had almost two years to figure out how to combine the old requirements from the Truth in Lending Act (TILA) and the Real Estate Settlement and Procedures Act (RESPA) into the new TILA-RESPA Integrated Disclosure, or TRID, forms. But they're still having trouble.
Before TRID, according to the National Association of Realtors, it took roughly 30 days to close. But in November, it took an average of 40.5 days. And according to Ellie Mae's Origination Insight Report, December closings took even longer than that -- up to 50 days.
The key to closing now is the new Closing Disclosure (CD), the statement of final loan terms and costs, which must be given to borrowers at least three days prior to settlement. Lenders cannot change any of those costs once the CD has been issued; otherwise, they are responsible for the differences.
"That's why lenders either wait until the last possible moment to issue the CD, or they have a strict list of items that must be completed in the loan process prior to issuing the CD," says Daniel Jacobs of Michigan Mutual.
So, how do you avoid a TRID-related delay in your closing? Here are a few ideas from the experts:
-- Rate lock. Ask your lender for a longer rate lock, or guarantee of a certain rate pledged on your new loan. That way, if the closing is delayed, you won't lose whatever interest rate you were promised.
Prior to TRID, you could lock in your rate with the lender and close the next day. Now, the rate must be locked in prior to the CD being issued. So lock it in early, advises Jacobs.
Pay extra for a longer rate lock if you have to. Typically, lenders will guarantee their rates for 30 days, but they will lock it in for a longer period -- at a price. It may well be worth paying a few hundred extra dollars for the peace of mind in knowing that however long it takes for the paperwork to be done correctly, you won't lose the house.
-- Act quickly. Schedule all inspections and surveys right away. That way, if there is an issue -- say, the home inspection finds a major problem with the furnace, or the surveyor discovers an unknown right-of-way through the property -- it can be resolved. Moreover, invoices or paid receipts for these services must be accounted for on the CD.
Similarly, invoices or quotes for homeowners' association dues and insurance premiums also must be accounted for on the CD, so take care of these early, too. And if the lender vows to contact the HOA or your insurance agent on your behalf, ask for confirmation.
-- Slow down. Schedule the sale of your current house for at least a week after you are set to close on the new place. Similarly, don't give up your apartment too early. Give yourself plenty of time. It may cost an extra month's house payment or rent, but if there is a delay in closing on your new place, your family won't be out on the street.
"If you are selling one home and moving into another, give yourself more time for issues arising on both ends of the transaction," says Becky Walzak, a longtime mortgage business consultant.
-- Tell all. Don't hold anything back. "Full disclosure, always," advises Brian Koss of the Mortgage Network. Koss says borrowers need to know that getting a mortgage "will be akin to an IRS audit," so they should tell lenders everything. "Because these days, the lender will find it anyway," he says.
If your lender discovers new information toward the end of the transaction, the closing will be postponed. "And until it can be proven otherwise, the new information will be presumed to be an issue," says Koss.
-- Double up. Attach two years' worth of W2s, two months' worth of pay stubs and two months of bank statements to your loan application -- and keep copies for yourself. If you wait until the lender asks for these and other documents, it will slow the underwriting process.
-- Nothing big. Don't make any major transactions -- taking out a car loan, for example, or charging a room full of furniture -- until after closing. Ditto for taking a job at a new company.
"Any movement of money through bank accounts or credit cards, or job changes, can cause your loan to be postponed or denied," says Koss. This holds true even if you've already been approved, because all loans are really only "conditionally approved" until just a few days before closing. The lender can recheck your financial picture at any time.
"You must keep your profile exactly as presented until after closing," explains Koss. "This is one of the biggest delays in lending, and it causes mad scrambles to keep deals on track."