What Are Things To Avoid During Mortgage Process?
The mortgage process can be very stressful and many times, due to the many rules and regulations by mortgage regulators, many mortgage loan borrowers do not understand and will never understand the strict rule on disclosures and re-disclosures and the documents that is being requested, some being very silly. However, just because you are pre-approved for a mortgage loan does not guarantee a closing and there are things to avoid during mortgage process to avoid delays in mortgage closing or ruining your pre-approval altogether. If you avoid things to avoid during mortgage process, you will avoid potential closing delays and/or avoid opening up another can of worms where more and more paperwork is needed.
One Of The Things To Avoid During Mortgage Process Is Depositing And Withdrawing Large Amounts Of Funds From Bank Accounts
All large and/or irregular bank deposits in the past 60 days needs to be sourced in order for the mortgage loan borrower to use for the down payment and/or closing costs for a home purchase. An unsourced large bank deposit and/or withdrawal will place your mortgage loan approval at jeopardy or delay your mortgage loan closing. Cash does not count in the mortgage industry and any cash deposits cannot be used. All larger bank deposits in the past 60 days of cash, checks, and electronic wire transfers will be reviewed by your mortgage lender and a letter of explanation will be required. If you can provide documented proof that the bank deposit is not a loan but your funds either from a sale of a large ticket item, then you will be in good shape and be able to use the deposit. Smaller irregular deposits or $200 or less will not be normally be questioned. Here are what mortgage underwriters will ask for large and/or irregular deposits from mortgage loan borrowers:
- A copy of the canceled check
- A letter from someone who gave you the money and the reason for them giving you money whether it was a sale of a merchandise or whether it was a gift.
- A copy of a bill of sale, title, and canceled check if you sold a larger ticket item such as a vehicle, boat, motorcycle, recreational vehicle.
Mortgage loan applicants needs to be totally honest and upfront with their loan officers. Hiding things to your loan officer can cause major delays and even kill the mortgage loan. Your mortgage loan officer is on your side and will do everything possible to help you and close your home loan. Remember that loan officers are on commission and that they do not get paid a penny until they close on your home loan.
Co-Signing On Another Loan Are Things To Avoid During Mortgage Process
It is rather difficult to say no to a family member who asks you to co-sign for them on another loan. However, co-signing on another loan is one of the most important things to avoid during mortgage process. Co-Signing on another loan will put yourself and your credit at risk and affect your buying power on your home purchase because it affects your debt to income ratios. In the event if the person who you co-signed for is late on their monthly payments, it will affect your credit negatively and drop your credit scores and if the borrowers defaults on their loan, you will be responsible for the loan.
Do Not Apply For New Credit During Mortgage Process
Applying for new credit is one of the things to avoid during mortgage process. There are two issues with applying for new credit. Any new credit obligations will affect your debt to income ratios and anytime you apply for new credit, it is considered a hard credit pull. Each hard credit pull will drop your credit scores by at least 2 to 5 FICO points. Plus with every credit inquiry, you will need to write a letter of explanation to the mortgage loan underwriter as of why you applied for new credit. When shopping for a mortgage, please try to avoid running your credit multiple times. Talk to the mortgage lender first and see whether you qualify with that particular mortgage lender and if you should decide to go with that mortgage lender, then give them the green light to run your credit. Don’t just have the mortgage lender run your credit first and ask questions later after they ran your credit. Remember, try to avoid from having too many credit inquiries during the mortgage application and mortgage approval process.
Changing Jobs Are Things To Avoid During Mortgage Process
Changing jobs are things to avoid during mortgage process. Changing jobs during mortgage process, at best, will delay your mortgage closing and depending on the type of job the borrower has change can possibly disqualify the borrower from qualifying for a mortgage loan altogether. For example, if a mortgage loan borrower went from W-2 wage earner job to a 1099 new job, this will definitely disqualify the borrower for a mortgage loan. If you start a new 1099 wage earner job, there is a minimum of a two year history required. If you go from one W-2 wage earner job and quit that job and get a comparable W-2 wage earner new job, then you need 30 days pay check stubs from your new job in order to get a clear to close on your mortgage loan.
Making Large Purchases Are Things To Avoid During Mortgage Process
Many new home buyers purchase new cars when they buy a home. However, buying a new car or buying any high ticket items during the mortgage application and mortgage approval process are things to avoid during mortgage process. Most new vehicles cost $30,000 or more and that translates into a $500 monthly car payment. A $500 monthly car payment is equivalent to a $100,000 mortgage. There are so many home buyers that cannot qualify for the home of their dreams due to their new car payment. A new car should wait until after you have closed on your home.
Changing Your Bank Accounts
Mortgage lenders want to see longevity in employment and asset accounts. Do not be transferring money from one account to another bank account and be opening and closing bank accounts during the mortgage application and mortgage approval process. Doing so will make it extremely difficult to go back and track your funds and will most likely be time consuming which translates in mortgage loan closing delays. If you need to transfer funds from one account to another account, then make sure you have paper trail to track those funds when the mortgage loan underwriter requests them.
Make Sure Your Savings Are Secured
Your down payment and closing costs will need to be verified and sourced all the way up to the closing date. Just because the mortgage loan underwriter has verified the down payment and closing costs earlier in the mortgage process does not mean they will not do it again. Mortgage underwriters will ask for updated bank statements up to the date of the closing so make sure you do not spend or are short of your savings to close on your home. Many home buyers are so excited that they cannot wait to purchase new furniture, place deposits on home improvement items such as a pool, jaccuzzi, entertainment centers, or other high ticket items. You cannot be short a single penny. Any shortages of your closing and down payment will definitely become a issue. It is not as simple as asking mom and dad to lend you a few bucks you are short on your home closing. Remember that mortgage lenders needs to see verified and sourced funds for down payment and closing costs.