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I just signed a final contract on a house (single family in Illinois) and I waived the mortgage contingency. The reason I waved the contingency is because I had absolutely no concerns about getting a mortgage because of my other assets. To give some idea of the numbers (normalized so that the price of the house is 1000),

House cost = 1000; Cash reserves = 835; Stocks = 230; Downpayment = 680;

And I want to get a 320 mortgage.

However, because there was some negotiation during attorney review, I now only have 29 days until closing, and only now am I realizing that mortgages can take quite a lot of time. Now I'm panicking that the mortgage is not going to close on time. I could liquidate my stocks if necessary, but I really don't want to do that for many reasons. How worried should I be? What happens in practice if something is delayed? The worst case scenario is that if it doesn't come in on time (and I don't liquidate the stocks) the owners claim a breach of contract and walk away with the 5% escrow money.

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  • My mortgage was delayed just recently past closing date; various delays due to unavailable house inspectors, overloaded system, etc. It wasn't really a big issue, we just contacted the selling agent and signed a closing extension form. This was with a relatively friendly seller, though. Sep 29, 2021 at 18:16

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I don't think 29 days would be a problem. Has a lender told you it isn't possible? I'd ask one or more lenders to confirm. If they can do 29 days, then great, no issues. (This is my expectation.)

Update: I just asked a friend of mine who is a mortgage broker in Illinois what's the fastest he could do, and he said 15-20 days. So call some brokers ASAP.

But for the sake of this question, let's explore what happens if they can't, and the loan closing date will be, say, 30 days from now, then you could simply ask the seller if they could push the closing by a day. (I'd expect that to be OK too, though I could be wrong in a hot market and if the seller already regrets taking your offer for some reason.)

If the seller won't budge, then you simply have to weigh these options:

  1. Sell some stock (approximately 105 worth*) for a few days, and potentially buy the same stocks right back (or buy something else!)
  2. Pay 50 to avoid doing #1, and lose the house.

The cost of choosing #1 is going to be highly dependent on your personal situation. Are your stocks currently at a loss or a gain? Would the wash sale rule apply if you don't wait 30 days? But whatever that cost is, it seems unlikely to add up to nearly half the value of the stock you need to sell. (You're comparing selling 105 units vs losing 50 units).

There is another option too:

  1. Borrow the 105 from somewhere else as a short term loan. The interest will be negligible and even if there is an origination fee it still may be cheaper than options 1 or 2 (as long as there isn't a pre-payment penalty). I've actually done this before. I once borrowed $30K as a term loan (that had no origination fees), and paid it off about a week later. I did it because I had a rare 0% interest with 0% fee balance transfer credit card offer for 18 months that could only pay off an existing loan. So I took out the loan, paid it off with the CC and threw the money into a high yield savings account for 18 months. Between the interest and the deposit bonus I think it ended up profiting $1000 for this rare sort of arbitrage. (Though I had to pay taxes on it so the true profit was less than that, but it was kind of fun...)

Side note: if you end up in the worst case scenario, hiring an attorney who can help you push the closing date may be cheaper than either of your other options.


*I'm calculating 105 based on home price (1000) minus cash reserves (835) minus escrow already paid towards down payment (50). 1000-835-50 = 105.

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  • Thanks! Stocks are at a (long term) gain. We certainly expect the mortgage to come through in time (application already in!). We fortunately have a real estate lawyer and they also expect that the owners are not going to play super hard ball if we need a few more days, it's just that with 50 units on the line one usually wants to be totally sure. Since I didn't remove the escrow money from what I gave above, I would have to sell 1000-835=165 in stocks. Guesstimating the gain to be 50% and then with 20% capital gains that would be 165/(1.5 x 5) = 22 in taxes.
    – chagrined
    Sep 24, 2021 at 17:36
  • I wish there existed very short term loans (with 2 x value of stocks as collateral) that could be obtained at very short notice. Then I would have that as a backup. I just don't think that sort of thing exists.
    – chagrined
    Sep 24, 2021 at 17:38
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    @chagrined Check out SBLOC.
    – TTT
    Sep 24, 2021 at 17:42
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    Thanks! Definitely seems like it might be a possibility
    – chagrined
    Sep 24, 2021 at 17:57
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Depending on your contract, you may pay a fee per day beyond closing. Typically what will happen, at least in my California experience, is you will be given a notice to perform when the closing should have happened. That usually requires you to complete the transaction within 48 hours of receiving the notice or you forfeit the earnest money and the contract can be cancelled.

The best thing to do is communicate with the listing agent and let them know there may be a day or two delay with the mortgage. If the sellers are contingent and need that cash on a specific date, make sure to coordinate with the mortgage company so they understand all the moving parts and can prioritize.

Also, we're seeing 25 day escrows all the time right now in California.

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