Common Challenges in Real-Estate Lending and Closing

Have you been struggling to understand all the ins and outs of buying property?  We understand that real estate lending and closing can be difficult to figure out if you are unfamiliar with the process or are a first-time buyer.  

In this blog post, we will explain a few common real estate challenges, such as the difference between mortgage pre-approval and approval, navigating inspection surprises, and handling title issues. 

At Management Plus, we are committed to being an advocate for you. 

The Difference Between Mortgage Pre-Approval vs. Approval  

Mortgage pre-approval and approval are two distinct stages in obtaining a home loan. Understanding the difference between them is crucial if you are a prospective homebuyer. 

Mortgage pre-approval is the preliminary step in the mortgage application process. It is a preliminary assessment conducted by a lender to determine whether you are eligible for a mortgage loan.  

During pre-approval, the lender reviews your financial information, credit history, and employment details. This evaluation helps the lender estimate the maximum loan amount that you can qualify for. However, pre-approval is not a guarantee that the mortgage will be approved. It simply provides a solid indication of your eligibility.

On the other hand, mortgage approval is the last step where the lender evaluates your application and decides whether to grant the mortgage.  

During this stage, the lender conducts a more detailed review of your financial documents, credit history, employment stability, and property information. The lender verifies your financial information and confirms that all necessary documents have been provided. If the lender is satisfied with your financial profile and property appraisal, the mortgage is approved, and you can proceed with the home purchase. 

Several factors can prevent you from obtaining final approval for a mortgage.  

Two main reasons are insufficient income and an inadequate credit score. The lender will assess your income to confirm that you have the financial capacity to repay the loan. If your income is not stable or does not meet the lender's requirements, it may result in the denial of the mortgage application.  

Similarly, an insufficient credit score can also lead to a loan denial. Lenders use credit scores to assess your creditworthiness and reliability in repaying debts. If you have a history of past due payments, excessive debt, or bankruptcies, your credit score may be low, making it difficult to obtain final mortgage approval.

We suggest that you pay off any debts you have incurred and try to establish a pattern of credibility through your credit card prior to applying for a mortgage.  

Final Walk-Through Inspection Surprises  

We understand that an inspection surprise can be frustrating and time-consuming and can delay the closing process. If you encounter an inspection surprise during the final walk-through, it is essential to address and rectify the issue promptly.  

Here are some tips to navigate issues:  

1. Communicate with the lender or seller. By communicating, you can start the process of determining the best course of action. This may involve negotiating repairs or financial compensation for any issues found during the inspection. If you and the lender cannot agree on who should pay to fix the issues, the closing may be delayed. 
   
   
   • The resolution will vary depending on the severity and nature of the surprise. 
     
     
   • If significant issues are identified during the inspection, additional time may be needed to handle them. This delay can occur as repairs or negotiations take place, potentially pushing back the closing date. It is crucial for all parties involved to remain proactive and communicative throughout this process to minimize any delays and ensure smooth closing. 
     
     
     
2. Schedule contractors or professionals to carry out repairs: Once an agreement has been reached, contractors or other professionals need to be scheduled to carry out the repairs, either before or after the closing. The seller should confirm that the work is completed to their satisfaction and in accordance with any applicable regulations or standards.
   
   
   
3. Offer to handle repairs once you move in: If a lender threatens to drop your mortgage approval due to the result of an inspection, you can offer to handle the repairs yourself once you move in to give the seller more incentive to sell it to you in a competitive market. 
   
   
   • If you want to learn more about ways you can increase your property value by handling repairs, click here!  

How You Can Handle Title Issues  

A house title is a legal document that proves your ownership of a property. It includes information about who the rightful owner is, any liens or encumbrances on the property, and any restrictions or easements that may affect the property's use. 

Several factors can prevent a lender from transferring a home's title to you. One common issue is a lien on the property, which is a claim by a creditor against the property as collateral for a debt. 

If the seller has unpaid debts, such as unpaid taxes or outstanding mortgages, the title cannot be transferred until these debts are resolved. Sellers may need to work with their attorney or a title company to resolve it. This may involve negotiating with creditors, paying off their outstanding debts, or obtaining legal releases for any liens. 

Other potential obstacles you can look out for include errors or discrepancies in the title, such as a misspelled name or an incorrect legal description of the property, or a previous owner's failure to transfer the title properly. 

A minor inconsistency, such as a misspelled street name, could potentially lead to a delay in resolving the issue, which may take several hours or even days to fix. 

We recommend that you be proactive by making sure that all your legal documentation is accurate and consistent. Make sure to double-check for typos. If you find anything that is inaccurate, communicate that information as soon as you can to prevent delays. 

Navigate Real Estate Challenges with Management Plus 

The ability to understand mortgage pre-approval and approval, navigate inspection surprises, and handle title issues is only a small portion of what you may need to know during the process of buying a home.  

Management Plus is here for all your real estate lending and closing questions that you may have. 

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