Last week, I started talking about the loan process in real estate. The loan process can be agonizing, especially if it’s your first time going about real estate investing. And sometimes, things don’t go over smoothly. What should have been a smooth flight, left you feeling like everything might fall through. Two tips for avoiding the following as best as you can: 1. Tell the truth on your loan application! 2. Check your credit report and watch your loans!

Check out this list of real loan process issues that can come up.

  • Recent late payments on your credit report. The lender calls and they give you a particular interest rate and tell you when they can close the loan. But then they run into a thirty day late payment that you didn’t know about. That tremendously hurts the loan process.
  • The loan officer or mortgage broker finds out about additional debt after the application. Look at your credit report before you apply to make sure you understand what’s on there.
  • Obtaining verification of rents (if you are an investor). You need to have signed the leases that show what your income is on your particular properties.
  • Bankruptcy within the last 2 years. That is not a good thing when you’re trying to borrow money as an investor or on a personal home loan!
  • Borrower changes jobs and goes from salary to 100% commission income. This isn’t common, but I have seen tit happen. It can send the whole process into a tailspin.
  • You come up short on money at closing. Make sure you have those liquid funds!
  • Seller loses motivation to sell. Maybe the job transfer doesn’t go through, or he reconciles his marriage. That can throw you out and you would have to go into litigation to force the seller to sell.
  • You didn’t own 100% of property as previously disclosed. Maybe you listed property on your loan application that you didn’t completely own.
  • Seller does not complete repairs. If the seller does not complete all of the repairs listed in the contract, it can hold up the process or even stop it completely.
  • Seller goes into foreclosure during escrow. Now I can tell you right now that’s a major problem. Then you have to deal with the lender directly to deal with that.
  • Realtor is inexperienced in investment property. If the realtor is inexperienced in this type of property transaction, he might not report things correctly for the underwriter.
  • In an escrow company, they fail to obtain information from lenders or insurance companies in a timely manner. I’ve personally experienced this where the company actually held up the closing.
  • Appraiser makes mistake and appraisal is wrong.  They set the value too low and that will hold you up.
  • Inspectors do not assess minor damage correctly. I’ve had an inspector do this. There was a hole in the wall that could have been patched over, which we took care of, but the loan process was held up because they said the walls were uncovered.

These might seem like small things, but they are real-life examples of things that can go wrong. I want you to know that turbulence CAN happen in a loan process. So be as prepared as you possibly can!

What questions do you have about the real estate loan process? Let me know in the comments below!

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