Things To Do Prior To Mortgage Application Process

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This BLOG On Things To Do Prior To Mortgage Application Process Was UPDATED And PUBLISHED On March 19th, 2020

What are the things to do before applying for a mortgage

Home Buyers who have decided that they are going to be purchasing a home in the very near future, there are certain Things To Do Prior To Mortgage Application Process. Some of the Things To Do Prior To Mortgage Application Process is to get ready prior to applying for a mortgage loan so things can go smoothly.

One of the most important things to consider is to see how much house you can afford.

In this article, we will discuss and cover the Things To Do Prior To Mortgage Application Process.

How Much Home Can You Afford?

Home Buyers should start shopping for a loan officer and lender. Borrowers should contact a mortgage lender, or several, to see what they qualify for. Just because a mortgage lender gives the maximum amount borrowers qualify for does not mean that is their budget.

  • Mortgage loan originator will give borrowers a maximum housing budget and it is up to the home buyer whether they feel comfortable
  • Remember that housing expense is not just mortgage payment

Home Buyers need to consider reserves in the event if furnace, air conditioning unit, or appliances break down where is the replacement money going to come from.

Things To Avoid And Things To Do Prior To Mortgage Application Process

There are certain Things To Do Prior To Mortgage Application Process:

  • First, do everything possible to maximize credit scores and have a strong credit profile
  • For example, those who have had prior bad credit and only have one credit card try to get two more secured credit cards to get more credit tradelines and maximize credit scores
  • Do not max out credit limit
  • Always have credit balance below the 10% of credit limit
  • Those who have high balances on your credit cards, pay them down so balance is less than 10% of the credit limit
  • By doing so,  credit scores will increase
  • Get a copy of credit report

Consumers can get one free credit report from each of the three major credit bureaus each year:

  • Experian
  • Transunion
  • Equifax

Consumers can get a free credit report once a year by requesting it from www.annualcreditreport.com.  Upon getting credit report, check to see for any errors.

Things To Avoid Prior To Mortgage Application

What are the things to avoid before applying for a mortgage?

 

There are several things the borrower needs to avoid prior to applying for the mortgage application.

  • One of the most negative things to avoid doing is having creditors pull  credit
  • Each hard pull credit inquiry can drop your credit scores by 5 or more points
  • Another thing to avoid is getting new credit, especially automobile loan
  • The average automobile loan’s monthly payment is $400 per month
  • By having an additional $400 per month monthly payment will decrease home buying power by $100,000
  • A $100,000 mortgage is equivalent to a $400 monthly payment

Many folks who recently bought an automobile get forced in buying a smaller home because of the auto loan.

Never Close Out Active Credit Tradelines

Another Things To Do Prior To Mortgage Application Process is to close out active credit account.

  • Closing out a seasoned credit card account will definitely hurt credit scores
  • Credit bureaus look at the length of credit history and the available credit limit on existing credit account in calculating credit scores
  • By canceling or closing out an active credit account with a zero balance that they have had for years, they are cheating themselves from an optimum credit history account plus credit scores will drop

No Overdrafts In Bank Statements

Always have overdraft protection on all of the checking accounts.

  • Many lenders will deny a mortgage application where the borrower had overdrafts on their checking account
  • Some mortgage lenders do not even accept a $5 dollar overdraft in the past 12 months
  • Do not play musical bank accounts and open up new bank accounts and close out existing bank accounts
  • Make sure all deposits over $200 are sourced and all withdrawals are documented
  • Have a separate savings account where the down payment of new home purchase is documented and seasoned
  • Document everything because mortgage lenders will ask for any irregular deposits or withdrawals within the past 60 days of the mortgage application.

Mattress Money, Cash, And Undocumented Funds

What is money from the mattress, cash and undocumented funds

Borrowers who have mattress money, cash, or undocumented funds, deposit it to bank account 60 days prior to the mortgage application.

  • Mortgage lenders only require two months bank statements
  • Borrowers can have cash or undocumented funds deposited in the bank account that has been seasoned more than 60 days

Any deposits that are within the 60-day window need to be sourced and documented.

Qualifying For Mortgage With Direct Lender With No Overlays

FHA is the most popular loan program for first time home buyers, those with higher debt to income ratios, and buyers with less than perfect credit.

  • Remember that not all FHA Lenders are created equally
  • Just because an FHA Lender may tell a borrower they do not qualify that does not mean that the borrower does not qualify with other Lenders
  • Gustan Cho Associates is a five-star national mortgage company with no lender overlays on government and conventional loans
  • Over 75% of our borrowers either gotten a last-minute mortgage denial by other lenders or could not qualify with other lenders due to their mortgage overlays

Borrowers who need to qualify with a direct lender with no overlays on government and/or conventional loans, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com.

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