When buying a home or refinancing your current home loan, there are some seemingly harmless, normal activities that can derail the processing of your home loan. Strongly consider avoiding the following without first consulting your loan officer.
Things you should not do:
- DO NOT take on new debts, start any new loans, consolidate, co-sign, get a car lease, apply for new credit cards. Right before your final loan documents are prepared, an updated credit report is pulled. This report does not have credit scores, but it will allow the lender to see all new credit inquires, any new credit lines, and most recent balances and payments on all accounts. If anything changes, your loan may have to go back the underwriter for an updated approval. This may cause delays or worse, the status of your loan could change from approved to declined.
- DO NOT quit your job and start your own business in the middle of the loan process.
- DO NOT withhold information. With today’s access to information and technology, mortgage companies do comprehensive reviews of all of your personal identification information and all of your financial history. A comprehensive search of property records to verify ownership interest in real property is also done. Withholding material information will only hinder a true assessment of your qualifications, and can often times pop up at the last
- DO NOT make large deposits of cash into your bank account which cannot be sourced. Please consult with your mortgage professional before depositing money into the bank other than your normal payroll check.
- DO NOT change jobs. This includes changing positions that impact the way you are paid. For instance, a simple switch from an hourly wage earner to full commission completely changes the way an underwriter looks at your income. Please inform your mortgage consultant with any changes to your current position.
- DO NOT do anything that could lower your credit score. Making late payments, increasing your credit card balances, or simply applying for new credit can lower your scores and adversely affect your ability to get your loan approved.
Most people do not like to be told what not to do, but this list above is terribly important to follow and heed. By not doing the things listed above, your loan process can avoid disastrous pitfalls. To help make for a smoother loan process, here is a list of best practices.
Things You Should Do:
- DO keep original copies of documents or be able to access them easily. Items like paycheck stubs, bank statements and other important financial documents may need to be updated throughout the loan process. It is not uncommon for people to pack away important documents while preparing to move. If not stored electronically, it is very important to keep financial records handy.
- DO provide all financial information, ownership information in real property, and any other material information. A complete financial picture is required for a mortgage application. Any ownership interest in real property must also be disclosed along with any material information. Examples of material information would be a recent divorce, spousal support agreement, child support agreement, or any private financial agreement or payment arrangement.
- DO provide your Earnest Money Deposit from your own personal bank account or acceptable gift funds. Please talk to your loan officer or loan coordinator for additional clarification. This will present a very difficult problem if not managed properly at the time you write a contract on a home.
- DO provide all documentation for the sale of your current home. If you are selling a home and then buying another home, the underwriter will want to review the sales contract, closing statement, and any possible employer relocation or buy-out program for the home you are selling.
- DO notify your loan officer or loan coordinator if you plan to receive gift funds. Gift funds may be used towards your down payment and closing costs, but only if certain criteria are met. Advances from credit cards for your down payment and closing costs are never acceptable.
- DO notify your loan officer or loan coordinator of any employment changes such as a recent raise, promotion, transfer, or change of pay status.
- DO be aware that a new credit report could be pulled just prior to closing. Do not make any changes to your credit history without discussing its potential impact with your loan officer.
Following these dos and don’ts will significantly improve the loan process from the time you get prequalified to the time you close. For clarification or further explanation of any of the dos and don’ts, contact your loan officer.