The underwriting conditions have been submitted reviewed and approved by the underwriter so the loan is "clear to close" but we are not finished yet!
At the very end of the mortgage approval process there are two last double checks that can put borrowers at risk.
Within five days of the closing the lender is required to do a 'credit refresh.' This report does not re-pull the credit report but shows the lender any activity that may have impacted the credit report since the credit was originally pulled. The report is looking for newly issued credit and any indications of sloppiness with credit during the mortgage process timeline. Depending on the outcome of the credit refresh report a full credit report may have to be pulled to see if the reported activity has impacted the borrower’s credit scores. Borrowers on the edge of either debt ratios or credit scores could lose their approval.
At this point since the loan had been approved and the commitment date has passed, if there are any issues that show up on the credit refresh the borrower is at risk of losing their deposit if the loan does not close. We work very closely with borrowers and counsel them not to make major purchases or get new credit cards (no matter how attractive the offer is) without consulting with us first. We have had to re-work loans because of a $20 increase in debt; this is a serious consequence and one that we all monitor.
In addition to the credit refresh we are also required to complete a "verbal verification of employment" within five days of the closing. This is to confirm that the borrower or borrowers remain employed as stated on the mortgage application. Ironically, we have had borrowers who have changed or left jobs and neglected to inform us. Needless to say this can create some complications just days before the closing!
Both the credit refresh and the verbal verifications of employment can be the source of a delay in the closing as well. If a closing is delayed both verifications my need to be re-done (remember they must be completed within five days of closing). There are some employers in the area that will only complete the verbal verification on set hours and days, so timing can be a problem.
It is vitally important to your closings that you and your buyer clients are fully educated and up to date on any complications that may impact them. Borrowers with high ratios or lower credit scores need special communication and monitoring from the lender to insure a smooth transaction up until and beyond the closing.