August 31, 2015

How to Keep Your Closing on Track

Christina Boyle
Christina Boyle, SVP Single-Family Chief Client Officer

There's no mystery why home sales have been on an upward trend. The mystery is why so many sales contracts are held up at closing by financial issues.

The housing market is benefiting from current economic conditions, which have been largely positive. The 30-year fixed-rate mortgage rate remains in the buyer-friendly range of 3.84 to 4.25 percent. The minimum down payment needed to qualify for a Freddie Mac conforming, conventional mortgage throttled down to 3 percent with our Home Possible AdvantageSM mortgage.

On the other hand, 36 percent of the Realtors® recently surveyed by Realtor® Magazine  report delayed or terminated sales contracts. The number one reason, "Obtaining financing," was given by 12 percent of those reporting a problem.

This doesn't have to be the case. Homebuyers can take several actions before and after submitting a contract to improve the chances of coming away from the closing table a homeowner.

Before calling a real estate professional and seriously hunting for a home:

  • Find out your current credit history and score. You don't want any surprises down the road. If you have no credit history, or have had credit problems in the past, you can take steps to build, improve, and maintain strong credit. Contact a HUD-approved housing counselor for free advice.
  • Talk to your lender about applying for a mortgage and getting a pre-approval letter. This letter gives an estimate of how much you might be able to borrow – provided your financial status doesn't change – and demonstrates to home sellers that you're a serious buyer.
  • Gather all of your documentation. Expect the lender to request documentation verifying your income (W-2 forms, tax returns, employment records), credit history, and assets (such as bank statements to verify your savings).

After signing a purchase contract but before closing:

  • Don't take on more debt or make large cash purchases. Resist the temptation to take out new loans or open new credit cards. Taking on more debt could affect your credit profile and may require the lender to resubmit your mortgage application to verify you still qualify. Also, substantial cash purchases may make your mortgage company question whether you can really afford your monthly payments.
  • Meet your lender's deadlines for providing documentation or information. A missed deadline could delay the closing. A long delay could require you either to pay more to extend the mortgage terms you locked in when you submitted the application or, in the worst case, to reapply for the mortgage.

For more information on preparing for homeownership and financing a mortgage, visit My Home by Freddie MacSM.

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