If an escrow company were polled and asked what were some common reasons why escrows cancel or are delayed, one of the answers would most likely be related to financing. If a transaction is subject to a buyer successfully obtaining a loan, the buyer must arrange for a loan, obtain loan approval, and satisfy the lender’s requirements prior to the request for funding and closing. More importantly, the lender must fund and close the loan in accordance with the agreed upon timeframe in the purchase agreement. In other words, it does not take much for that timeline to be thrown to the curb if there are difficulties with obtaining loan approval due to the buyer’s financial situation, providing the lender with an acceptable property appraisal, and/or fulfilling all of the lender’s conditions.
If your transaction is contingent on your obtaining a loan, please remember to communicate with your mortgage broker and/or lender from the very beginning of the transaction. It is crucial that you ask questions up-front, and continue checking with your broker or lender regarding the status of the loan throughout the escrow.
There are many steps that a lender or broker must take when underwriting and approving your loan, and knowing the status of those steps will not only provide you with an indication of where you are in the process, but alert you to any pending or special conditions that will need to be satisfied in order to obtain the loan. While keeping track of loan approval and/or loan requirements is usually something your real estate broker, mortgage loan broker and/or escrow officer will do, it is wise to keep an open dialogue with your mortgage or lending professional so that you too are kept in the loop at all times. This also means that you need to keep all of the relevant players updated on any changes in your financial situation, as this information is pertinent to the loan and underwriting approval process. Communication is the key to any transaction involving financing, and your active role in that exchange is crucial.