There is no better teacher than experience. In the mortgage world, knowledge is very much power. We learn from our mistakes. It’s important to be as prepared and educated as possible to avoid any unpleasantness related to delayed closings or worse last minute loan denials. Yes it really happens.
When preparing for any refinance or purchase loan you must gather ALL you documents related to employment, income, assets, and even credit report items. Here’s why it matters. When underwriting your loan we will review really anything related to Capacity, Credit, Collateral, Character
One of the biggest flubs we can make when applying for a purchase mortgage or even a refinance mortgage are related to assets, and even more specifically moving assets. Money used for closing a purchase with a mortgage needs to be sourced, seasoned, and verified. That usually means all bank statements for the last 60 days with documentation of all deposits not clearly defined. If a deposit is not from a verified source, like an employer, we have to document those deposits with receipts, copies of checks, bank letters, showing the source of those monies.
Be SPECIFIC with your Loan Officer in regards to your income. If you are hourly but state you earned salary $89,000 be sure to spell out what you really make in base salary, overtime and other compensation. Just because you earned overtime, this year, doesn’t necessarily mean you can use that income to qualify. There needs to be a consistent. Are you talking losses on your taxes, then we need to see them and documents any small businesses, or tax losses in addition to income claimed. Did you have a GAP in employment? Make sure to be clear with your start dates and termination dates for all employers.
Whether refinancing or purchasing the property is every bit as important as the items above and below. Is the property in good repair, is there Carbon Monoxide detectors installed, is the water heather double braced, are the smoke detectors installed. If the property is a condominium? Is the project involved in a lawsuit? Are there a large number of units that are rented? If the property is a single family, there shouldn’t be any broken windows, second floor doors that are missing decks or stairs? Is there mold ANYWHERE? There should never be exposed wiring drywall not finished. There should always be flooring in the home. And utilities should always be on. Basically no health or safety issues present. The appraisers and inspectors on purchase loans, will also note these items.
4. Credit Reports
In addition to credit score, we actually read credit reports too. If you have disputed any item on your credit report, we will most likely have to remove the dispute. large balances on credit cards tend to drop scores dramatically. Make sure to maintain a small to moderate amount of credit use. Having at lest 75% of your revolving credit available is a pretty good target. Any lates or negative credit items need to be addressed and explained. Bankruptcies and Foreclosures require a substantial amount of documentation too, so be prepared. And NEVER EVER apply for additional credit during the mortgage application process. Don’t go buying the new fridge or stove just yet. And that new car may have to wait until you are done with your home loan process. And yes, we see you applied with someone else too. So please be ready to tell me why you don’t trust your Loan Officer. (OK that one is personal, and usually not a big deal to shop with one or two lenders)
5. The Loan Application Interview
If there is ANYTHING you think your Loan Officer needs to know that he didn’t ask you or bring up in an interview. DO SO YOURSELF. You know what’s happening, or happened, in your life better than we do. If you have a second car loan on your credit and your daughter pays for it, please note that. If there is an issue with qualifying and we don’t know that you don’t pay that car payment we could decline your loan. If you are in a lawsuit, its going to come out. Better to be clear earlier. If you are in a divorce tell your Loan Officer. Were you a veteran? You may be able to get a better VA Mortgage. Were you turned down already. It would really help to identify the problem area so we can identify a lender that doesn’t have issue with the item.
6. Be ready
It is NORMAL in today’s environment for the Loan Officer to come back for additional conditions. Sometimes it happens often as we try to meet the underwriters concerns or satisfy a condition. For example, you submit your two months bank statements to show you have your money to close. Well we need to source, season and document deposits. So if you deposited $5000 becuase you sold a car. We will most likely have to document you owned the car (car registration), sold the car (bill of sale), received money for the car (money from the buyer going into your bank). And that is for one deposit!
7. Be patient and be understanding
Things take time to review. When you send a condition to your loan officer, he will review it, forward it to the processor who will review it, and then if acceptable submit it to the underwriter for sign-off. This cane take several days. So don’t be surprised if they come back days later for a clarifying condition. In our business we run into very emotional people and when deals have problems, which is more likely in a tight credit market such as ours, things get tense. Try your best to maintain composure. A borrower that is willing to roll with the punches and work together with their loan officer has the best chance of being successful. That doesn’t mean it always works out. Sometimes after a lot of work by a lot of people time and money for reports and inspections and the deal falls apart. It’s unfortunate, but it is not the end of the world and you will probably be very knowledgeable about what needs to be fixed before you apply again. Don’t give up.