By AMY HOAK
The next few weeks are crucial for home buyers who need to close on a house before the end of June to claim the federal home-buyer tax credit. A hiccup during the next month could cost a buyer thousands of dollars.
"If for some unforeseen reason you end up closing on July 1, you lose out on the tax credit," says John T. Walsh, president of Total Mortgage Services in Milford, Conn.
Wesley Bedrosian
To qualify for the credit of up to $8,000 for first-time buyers and $6,500 for some repeat buyers, the contract had to be in place by April 30. Eligible buyers now need to close on that contract by June 30.
That two-month window is closing rapidly. There's now just a month left to wrap things up and while that may seem like a long time, it's not.
"Any number of delays could push it past June 30. It's not uncommon for purchases to take 75 to 90 days to settle," says Timothy M. Dwyer, president of title-insurance company Entitle Direct.
Delays often happen due to issues with approving the buyer's mortgage, but problems on the seller's side may also create a holdup. To minimize surprises, buyers should schedule the closing at least a week before the deadline, experts say, and keep the lines of communication open with all professionals working to get the sale finalized. Make sure everyone involved knows there's a tax credit at stake, so all parties understand that time is of the essence.
Also, keep in mind that in recent weeks lower mortgage rates created somewhat of a "mini refinance boom," Mr. Walsh says.
Loans for borrowers who qualify for the tax credit are generally taking priority over other mortgage applications, he says. But with a large volume of loans moving through the pipeline, it's likely that any mortgage will take longer to process—and potentially delay a closing.
But don't panic. Below are tips to make sure you get to the closing table on time.
Stay on top of things: Just because you're pre-approved for a mortgage doesn't mean you're guaranteed to get the loan, Mr. Dwyer says. It's only an indication that the bank—based on your basic financial information, the value of the home and the size of the loan—would likely fund a loan of that type, he says. There are a lot of steps before you get the green light, and often there is extra documentation required from the borrower at crunch time.
"Get all the information to the lender as quickly as possible," Mr. Dwyer says.
Joseph W. Rand, a real-estate associate broker in New City, N.Y., says take the initiative: Ask the lender or broker what they anticipate needing, based on their experience with past loans. That way, you're prepared to turn in whatever is needed just as soon as you're asked for it.
Some requests might not be obvious, including copies of pay stubs from a former employer if you recently switched jobs or a letter from a creditor to ensure you paid a debt in question, he says.
"The general idea is to sit down with the lender or give a call and say: 'What conceivably might you need from me in the next month to get this thing cleared to close?'" Mr. Rand says.
Make sure to follow up with the lender periodically as you head toward the closing date, Mr. Dwyer says.
And don't forget about the other supporting characters in the closing process: Depending on local custom, that could be a real-estate attorney, escrow agent or settlement agent. Be in contact with them, or make sure your real-estate agent is, to ensure everything is running smoothly.
Keep the seller on track, too: Sellers also have tasks to complete prior to closing, but they don't have the financial incentives buyers do to get the deal closed before the tax-credit deadline. So make sure the seller understands the urgency in getting necessary tasks completed.
Typical delay-causing events on the seller's side could include title problems or certificate-of-occupancy issues, Mr. Rand says. Buyers who are having an attorney review the title report should ask the lawyer to look at it as soon as possible after receiving it.
"They need to make sure there's nothing that might delay the closing," he says.
Some of the biggest issues will be property violations, he says, examples of which could include noncompliance with zoning codes or building permits that were never closed when work was done on the house.
Remember, too, that if the seller can't move before June 30, that doesn't necessarily prevent the closing from happening before that date. After the sale is finalized, the buyer can lease back the home to the seller for a short period of time, Mr. Dwyer says.
"Close the transaction in June and allow the seller to live in the house for a couple of weeks. Everyone wins," he says.
Just don't forget to put that temporary rental agreement in writing.
Create a time buffer: Above all, schedule the closing far enough before the deadline so that if there are delays, you can deal with them and still close on time.
"Don't schedule it for June 29," Mr. Dwyer says. He suggests scheduling a closing for June 21 at the latest.
Mr. Walsh agrees, suggesting even a two-week time buffer if possible, just in case.
"It's going to be crunch time at the end of June. I would suspect that there will be people who aren't going to close on June 30 who have every intention of closing on June 30," he says. "Prepare in advance, just in case there is a hiccup."
Write to Amy Hoak at amy.hoak@dowjones.com