Buyers and sellers have agreed to terms and conditions, the buyers have done their inspections, repairs have been agreed and done by the seller, the attorney has done the title work, the appraisal has been done, everything seems going perfect to close on time...
Enter, the lender's UNDERWRITER.
During the housing boom that ended three years ago, underwriters were just an extra check, and they were not really very concerned about confirming every little detail on the loan application, the contract and the origin of the deposit money. Maybe that's one of the reasons why we are in this mess altogether!
This has changed! Today underwriters have (it seems) unlimited power to minutiously dissect every little detail of the transaction, look for inconsistencies and faults until they find some, and then demand proof or amendments as they see fit! I closed a transaction last month where the underwriters requested three different written confirmation letters from my client's employer before they approved the loan!
It is really no surprise then, that files are taking a lot longer to be processed, that many loans that seemed like a "slam dunk" to the loan officer are being denied, and that the list of requirements and stipulations to approve a loan has grown exponentially.
Many of these requirements (unfortunately) tend to appear in the last few days before the closing, when everyone involved in the transaction thinks the transaction is going to close on time. Last minute underwriting stipilations send Buyers, Buyer's Agents, Mortgage Officers and Attorneys scrambling for cover in their effort to make the closing deadline. Sadly, the loan is often not approved on time for the loan package to arrive wto the attorney, and/or for the money to be wired into the attorney's account on time for the closing.
If approval is granted, but the money does not arrive on time, the parties can still go through the closing (a "dry" closing means all the documents have been signed, but the financial part of the transaction has not been completed) ans the transaction will have to be put "on hold" until the money arrives. This can be a problem for buyers who have the moving van arriving the day of the closing!
In this case it is best practice to let the attorneys hold all the documents, keys and garage door openers until the transaction is fully completed. Most dry closings are completed by the following business day - one of the reasons why I try to avoid scheduling my closings on Fridays...just in case.