Home Selling in 48116>Question Details

Laura, Both Buyer and Seller in Brighton, MI

Home closing postponed for a paperwork audit? What does this mean?

Asked by Laura, Brighton, MI Thu Apr 16, 2009

I was just informed that the closing on the sale of my home was postponed for 3 days while the bank brings in a third party to do a "paperwork audit" (my realtor's words). My realtor says this is becoming more common these days and is nothing to worry about.

But what is happening during this audit? We are in Michigan, where home prices have cratered. Could the appraisal price be questioned and lowered? Could the buyers be denied the loan at this point? All along I've been told there's "nothing wrong" and "everything looks good" but I'm very concerned.

I just don't understand what is happening during this audit and what the possible outcomes might be so I am interested in hearing from others who have experienced something like this.

Help the community by answering this question:


Hello, Laura!

I have experienced this only one time, and have completed numerous FHA transactions. In my case, the buyer was ultimately approved after more than 3 days, but there were additional hoops to jump through.

Please keep us posted, and I of course wish you the best!

Derek Bauer, Associate Broker / Realtor
Real Estate One
Web Reference: http://DoorToDreams.com
0 votes Thank Flag Link Thu Apr 16, 2009
good morning laura.......i have been in the mortgage business for over 14 years and done fha for almost seven years..i have never heard of a pre-closing audit...i do know lenders have post underwriting reviews and pre-closing reviews to double check the underwriter's documention of pre-closing conditions..it could be one of the following...there are appraisal reviews being done by lenders..these typically are not ordered by the buyer's lender until it is apparent that the deal will close.......the review appraisal has to hit within a certain percent of the sales price to pass....we are never told the tolerance levels they expect for these reviews, and they do change....also......now that mortgages require full income documentation, lenders are now ordering transcripts of buyer's tax returns to double check the dollars they are using to prove the amount of income they make.......w-2's and check stubs now and have been they way to prove the usable monthly gross lenders qualify buyers with, but recently.....federal tax return transcripts are being used to check deductions that would lower the usable gross income reflected on check stubs and w-2's...(for instance- un-reimbursed eployee expenses, or perhaps a child day-care credit that was not acknowledged on the 1003 application, and not caught in the underwriting proocess)..if a buyer's income is lowered to account for deductions taken on the federal return, that would raise the buyer's debt ratio, and possibly take an approved loan into a denied or "caution refer" status.......i hope that helps.bob mcclure- success mortgage partners- plymouth, michigan....
0 votes Thank Flag Link Thu Apr 16, 2009
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