Closing escrow on time is so important and rare these days. There are several moving parts in a real estate transaction and many times sellers are counting on receiving their funds on a schedule.
In a recent transaction I was involved in a man had $300,000 cash sitting in the bank. He was getting a loan for about $175,000 on a home priced at $395,000.00. The lender had pushed the debt to income ratio out as far as possible so he could finance every possible penny and not use more than $230,000.00 cash.
Every thing was going great until the lender realized it was in a flood zone. This made it a condition of the loan to have a flood insurance policy on the property. The policy turned out to be about $1,200.00 a year which threw his Debt to income ratio off just enough to make a $35 credit card purchase cause the file to be suspended. When you are a couple weeks away from closing escrow getting the file suspended is no fun! We had to wait for the $35 payment to clear and then the lender had to order another credit supplement. It looked like things were going to be fine and we would close a day late and then a $45 credit charge from 2 months prior appeared out of no where! Suddenly instead of funding the lender needed another credit supplement! 5 days after the supposed close of escrow we are waiting for a credit supplement and the loan to fund.
The sellers moved out of the house the day before the original closing date and headed to Northern California. They are waiting for the money to get their new life started. The buyer is waiting to get his keys, change the locks and move in. Everyone’s in limbo while we wait for the loan to fund. Limbo is no fun unless Mai Tais, pina coladas, a tropical island and a bamboo stick are involved.
In conclusion I have learned a powerful lesson that I want to share with my readers:
* Never have your lender push the loan amount to the very limit
* Always leave a little extra room for something to come up
* Do not charge ANYTHING until after you close, even then ask your lender when it would be OK to use your credit cards again
* Anything that can go wrong probably will go wrong in escrow
Looks like we’re closing tomorrow ***sigh***