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Seller here. First offer fell through on financing at the 11th hour. Second conditional period extended because of financing delays. Are the banks just slow, or does the delay tend to be an indicator of iffy buyer ability to pay mortgage?
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Nick's Response
If I were a Seller, I’d start to be concerned if the Buyer has asked for an extension of conditions by more than a week. It’s true that some lenders, especially banks, tend to be very slow and cautious with their approvals, but if the buyer is comfortably within their borrowing limits then a competent lending officer (at the bank, or an independent mortgage broker) should be able to get a firm commitment. That said, one of the Buyer’s Agents on my team ran into a similar situation this week (not the same one) where her Buyer client’s lender was extremely cagey about lending on a condominium and held up everything until the last moment.
In your position, I might ask my Realtor to see if they can investigate the specifics. In a similar situation I’ve asked the Buyer’s Realtor if I could get permission to speak with the Buyer’s lender directly (with everyone’s permission, of course) to see what information and documentation we could provide to move things along. In that same situation it ended up being an issue with the mortgage broker (who has since lost his license) and we referred one of our trusted mortgage brokers to the Buyer, who was able to firm up the sale. Assume that both sides are acting in good faith to put everything together, and see what each side can do (within reason) to help the other.
If the Buyer asks for any additional extensions, you may want to ask why, but also consider if there is currently other interest on your home. If there is, you have more leverage to force the Buyer to firm up or move on, and if not it may be best to work with the “bird in the hand” since you don’t know if the next offer that comes will be as appealing.
For Buyers, I nearly always recommend using an independent mortgage broker (Kristin Stauffer, Chris Allard, Elyse de Varennes as a shortlist) because they are MUCH more quick and responsive than the typical bank mortgage employee.
Good luck! I hope it all firms up smoothly and that you let us know the outcome!
Why do mortgage approvals get delayed?
Delays in the financing process can feel agonizing, especially when you’re ready to move forward with your purchase. However, there are several reasons why mortgage approvals can take longer than expected. Here’s an overview of some common causes:
1. Increased Volume of Applications
Mortgage lenders and brokers can become overwhelmed by the number of applications they are processing, especially in busy real estate seasons. Each application requires detailed review and verification, and backlogs are common.
2. Document Requests and Verifications
Lenders may ask for additional documents multiple times during the approval process. This might include proof of income, updated bank statements, or clarification on certain expenses. The more complex your financial situation, the more back-and-forth there might be between you and the lender.
3. Appraisal Delays
A home appraisal is a crucial step in securing financing. Appraisers can also face high demand or scheduling issues, which could delay the process. The lender relies on the appraisal to determine the value of the property and ensure that the loan amount is appropriate.
4. Underwriting Challenges
Underwriters analyze the details of your loan application, including your credit history, income, and the property itself. Sometimes, complications arise during this phase, such as questions about your debt load or the condition of the home, that require additional time to resolve (MoneySavingExpert Forum)(myREINspace).
5. Regulatory and Compliance Checks
Certain loans, particularly those involving special programs like first-time buyer incentives, require additional compliance checks. This can add to the timeline as lenders ensure they are meeting all regulatory requirements(myREINspace).
Three Final Tips for Handling Financing Delays
1
Get pre-approved early – Starting the pre-approval process well before you begin house hunting can save time down the road. It helps catch any potential issues early on.
2
Stay in close contact with your broker – Regular communication with your mortgage broker can help keep the process on track. Be prompt in responding to requests for additional information or documents. Our team typically recommends that Buyers use an independent mortgage broker rather than a bank where applicable.
3
Be Patient But Persistent – While it’s important to understand that some delays are out of your control, don’t hesitate to ask your broker or lender for updates. It’s their job to keep you informed, and sometimes, a little nudge can move things along.
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