As a mortgage professional, I’ve seen countless clients successfully navigate the mortgage process, while others encounter pitfalls that can jeopardize their dreams of homeownership or delay their closing. To ensure a smooth journey towards securing your dream home, it’s crucial to be aware of the dos and don’ts that can make or break your loan approval.
This week we are talking about some do’s and DON’Ts that you should keep in mind to keep from sabotaging your OWN loan application. Let’s delve into some key points to keep in mind:
Do
Know Your Credit Score: Before even beginning the house hunt, it’s essential to check your credit score. A higher credit score can lead to better loan terms and lower interest rates. Aim for a score of 620 or higher to qualify for most conventional loans.
Don’t
Do anything that will change your Debt-to-income or credit score: This means don’t take out any new loans, shop for cars or anything that will check your credit, apply for new credit, etc. Just keep things business as usual until AFTER the closing table. This includes being the co-signer on someone else’s loan. That will impact your DTI as a co-signer.
DO
Get Pre-Approved: Gain a competitive edge in the housing market by getting pre-approved for a mortgage. This process involves our team, as your lender, evaluating your financial information to determine the loan amount and program you would be eligible for. It not only helps you understand your budget but also signals to sellers that you’re a serious buyer.
DON’T
Assume that because you’ve been prequalified that you are home free: Sometimes people think that after we’ve run your credit the first time, or after we’ve done the verification on your job and other items that that’s all there is. Just so we’re clear: all of those verifications are RE-VERIFIED just before closing, so don’t quit your job, max out that card, or take out another loan until AFTER closing.
If something happens with your job, your truck breaks down and you need to trade it in, we KNOW things happen…the key point here is CALL ME. So we can execute a plan together to keep things on track!
Do
Stay Current on Payments and pay everything on time: Throughout the mortgage process, it’s crucial to maintain stability in your financial situation. Avoid making any significant purchases or opening new lines of credit, as this can negatively impact your debt-to-income ratio and raise red flags for lenders.
Don’t
Close any accounts without talking to us first: As strange as that sounds, sometimes paying OFF a liability can actually decrease your credit score. All payments should be business as usual, paid on time, and yes, that does include items that will be paid off at closing (such as debt to be paid, or mortgage that is paid or refinanced) If it’s your bill, pay it and pay on time until closing…and remember if you are co-signor on any obligations, those affect your credit too.
Do
Provide Complete Documentation: Be prepared to submit thorough documentation, including pay stubs, tax returns, bank statements, and any other financial records requested by your lender. Incomplete or inaccurate information can delay the underwriting process and hinder loan approval.
And while we’re at it, be open and honest about ALL your details. We want to help you, but need all the information in order to do so. Many things can be hiccups, or will need additional documentation, but we don’t want to be doing it at the closing table. Here is an example coming up
DON’T
Get married or divorced while in the loan process: We will celebrate with you, but AFTER the loan process is completed, OR at least mention that this is coming up and we’ll give you the best advice based on your situation. I’ve had people get married the day before closing without mentioning it, and guess what? That changes your vesting and other details in the loan…just make sure you talk about it with us so we can be best prepared. And if you are planning a divorce, do that first. Oklahoma is a marital property state…more about that in an upcoming video.
DO
Communicate Effectively: Do you see a theme here? This one is probably the most important do in our list. Clear and timely communication with your loan team is key. Be responsive to requests for additional information and provide any updates regarding your financial situation promptly. Transparency is vital for a successful mortgage transaction.
Don’t
Make big changes in your situation without talking to us first: Stability is crucial in the eyes of lenders. Avoid changing jobs or quitting your current job during the mortgage process, as it can raise concerns about your ability to repay the loan. Don’t make any big moves that affect your income, assets, credit, or marital status without having a conversation FIRST!
DO
Keep your checking/savings account balances up: Try to keep as much money in your accounts as you can. Don’t pull any large amounts out or make any large deposits that underwriters will need explanations for. Again, business as usual is best. Also, do not pay for anything home related (earnest money, home inspec-tion, etc) with cash. We will need to be able to source the funds as coming FROM YOU. So, we will need to see where the funds are withdrawn from your checking or savings account, not coming from your SOCK drawer.
DON’T
Make Large Deposits: Large deposits into your bank account can raise suspicions about the source of funds. Avoid making any large deposits or transferring money between accounts without talking to us first…again…you see the theme here?
Do
Make sure there is money in your account for CLOSING COSTS: If your loan type requires cash to close, make sure that updated bank statements that you send us reflect this money in the account. It will be a loan condition that you either have the funds to close in an account that you are using in this process, OR we need to have a verified gift process. If you are planning to use gift funds, you must tell us now so that we do the proper paperwork and we can make sure this doesn’t delay your closing.
DON’T
Go out and buy things for the home BEFORE we close: If you are spending cash to do this, that might be fine, but I always urge being conservative here, make sure the cash to close is there before spending from your account. And I’ll say it again, DO NOT OPEN THAT CREDIT CARD or new line of credit, at least not without talking to us first. I’ve seen a new line of credit tank a closing date when ratios are tight…so wait until you’ve closed or talk to us first. This also applies to buying a new car, new boat…you get the idea!
DO
Talk to your Mortgage Dream Team anytime there is a change, consideration, decision to be made regarding: your employment or income, your credit (new or paying off…anything outside business as usual) your personal status…married, single, divorced. I think you get the idea…talk to us, we are your consultants, we’re on your side and we will help you through the process…just please don’t set landmines in our way, and that’s by doing things without discussion.
AND OUR LAST DON’T:
Disregard Professional Advice: I’ve said all this to say, we are here to guide you through the mortgage process and help you make informed decisions. Listen to our advice, communicate with us and ask questions if you’re unsure about anything. Ignoring professional guidance can lead to costly mistakes. Sometimes it can completely derail the loan, and sometimes it can delay the closing…but we don’t want either of those, so please make sure we keep those lines of communication open. Tell us what’s going on, and listen to what we tell you too.
By adhering to these dos and don’ts, you can increase your chances of a smooth and successful mortgage approval process. Remember, preparation and communication are key, and a proactive approach can help you achieve your homeownership goals with confidence. If you have any questions or concerns along the way, don’t hesitate to reach out to our team for assistance. Here’s to a seamless journey to homeownership!
