Things To Avoid During Mortgage Process By Home Buyers

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Things To Avoid During Mortgage Process By Home Buyers

Things To Avoid During Mortgage Process: The mortgage process can be very stressful but does not need to be.

  • Many times, due to the many rules and regulations by mortgage regulators, borrowers do not understand and will never understand the strict rule on disclosures, re-disclosures and the documents
  • Many documents being requested may be seem very petty
  • However, just because borrowers are pre-approved for a mortgage loan does not guarantee a closing
  • There are things to avoid during mortgage process to avoid delays in mortgage closing or ruining pre-approval altogether
  • Watching out for things to avoid during mortgage process, borrowers will avoid potential closing delays and/or avoid opening up another can of worms where more and more paperwork is requested

Things To Avoid During Mortgage Process Is Depositing And Withdrawing Large Amounts Of Funds

All large and/or irregular bank deposits in the past 60 days needs to be sourced in order to use for the down payment and/or closing costs for a home purchase.

  • Unsourced large bank deposit and/or withdrawal will place mortgage approval at jeopardy or delay loan closing
  • Cash does not count in the mortgage industry
  • 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 mortgage underwriters
  • Letter of explanation will be required
  • Borrowers can provide documented proof that the bank deposit is not a loan but own funds
  • If from a sale of a large ticket item, then borrower will be in good shape
  • They 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:
    • copy of the canceled check
    • letter from someone who gave the money
    • reason for them giving money
    • whether it was a sale of a merchandise or whether it was a gift
    • copy of a bill of sale, title, and canceled check if borrowers sold a larger ticket item such as a vehicle, boat, motorcycle, recreational vehicle

Full Disclosure To Loan Officer

Mortgage loan applicants needs to be totally honest and upfront with their loan officers.

  • Hiding things to your loan officer can cause major delays
  • Even kill the mortgage loan
  • Loan officer is on your side and will do everything possible to help borrowers to close home loan
  • Remember that loan officers are on commission
  • They do not get paid a penny until they close on home loan

Co-Signing 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 credit at risk
  • I will affect buying power on home purchase
  • This is because it affects borrowers debt to income ratios
  • In the event if the person who borrower co-signed for is late on their monthly payments, it will affect borrowers credit negatively
  • It will drop their credit scores
  • If the main borrowers defaults on their loan, the co-signer 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 credit scores by at least 2 to 5 FICO points
  • Plus with every credit inquiry, borrowers will need to write a letter of explanation to underwriter as of why they applied for new credit
  • When shopping for a mortgage, please try to avoid running credit multiple times
  • Talk to lender first
  • See whether borrower qualify with that particular lender and if they should decide to go with that lender
  • If lender has no overlays then give them the green light to run credit
  • Don’t just have any loan officer run credit first and ask questions later after they ran credit
  • Remember, try to avoid from having too many credit inquiries during the mortgage application and 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 mortgage closing
  • Depending on the type of job, it can possibly disqualify borrowrs from qualifying for a mortgage loan altogether
  • For example, if borrowers went from W-2 wage earner job to a 1099 new job, this will definitely disqualify the borrower for a mortgage loan for at least two years
  • Starting new 1099 wage earner job, there is a minimum of a two year history required
  • Going from one W-2 wage earner job and quitting that job and get a comparable W-2 wage earner new job, then borrowers need 30 days pay check stubs from new job i
  • 30 days paycheck stubs is required in order to get a clear to close on 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 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 closing on home

Changing Bank Accounts

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 mortgage process
  • Doing so will make it extremely difficult to go back and track funds
  • Will most likely be time consuming
  • Translates in mortgage loan closing delays
  • If borrowers need to transfer funds from one account to another account, then make sure to have paper trail to track those funds when the mortgage underwriter requests them

Make Sure Savings Are Secured

Down payment and closing costs will need to be verified and sourced all the way up to the closing date. Just because the mortgage underwriter has verified the down payment and closing costs earlier in the mortgage process does not mean they will not do it again. Underwriters will ask for updated bank statements up to the date of the closing. Make sure not spend or are short of savings to close on 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. Cannot be short a single penny. Any shortages closing and down payment will definitely become a issue. It is not as simple as asking mom and dad to lend a few bucks short on home closing. Remember lenders needs to see verified and sourced funds for down payment and closing costs.

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