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Mortgage Lender Tips: Do’s and Don’ts During Home Loan Approval Process

Buying a new home can be a very stressful situation, especially if you are right on the bubble for the asking price and what you can afford to pay. Lenders need to make sure you are capable of making your monthly payments and one small slip-up on your part could put that application in jeopardy.

To make sure you increase your chances of being approved, we have put together a list of what you should and should not do during the time leading up to your mortgage application. If you are even thinking about buying a home in the near future, you should follow these tips to the letter. In addition, we would recommend reaching out to our lender, North American Mortgage Company, for a mortgage pre-approval so you know exactly how much buying power you have while conducting your search.

DON’T

  • Apply for any additional credit cards or loans during this time. Doing so will make your financial status seem desperate. Regardless of how good that credit card offer is to consolidate your debt that just arrived, stick it in the shredder.
  • Large cash deposits are also a red flag. This could be taken as a sign that an outside source is giving you cash to make your financial situation seem much better than it actually is.
  • Change jobs. This is especially true if you have a position where you currently receive yearly bonuses that are included in your current income. Any type of income fluctuation could damage your mortgage “worthiness.”
  • Co-sign for someone else. Remember, when you co-sign, your name is going on that credit application and it will show up on your credit report. This is just as risky as applying for your own loan or credit card during the mortgage application process.
  • Make any large purchases. That car or boat that you want is going to have to wait. A large purchase means your cash flow is decreased or you are adding another big payment that needs to be made in addition to your mortgage. Obviously, not a good idea.

Do

  • Alert your lender of any salary changes. While we told you above to avoid changing jobs, sometimes that new offer is just too good to pass up. If that is the case, you need to make your lender aware of the change as well as how this will impact your monthly income.
  • Maintain credit report. Now is not the time to miss a credit card or loan payment. Keep all of your open accounts active and current.
  • Get Homeowner’s Insurance. While your insurance will become part of your mortgage payment, you need to secure this on your own and pass that information on to your lender.
  • Update address changes during application process. An example of this might be that you have sold your home before you were able to buy a new one. If you move into an apartment or are living with someone else until you get your own home, make sure your lender is updated to the new address and the reason for the change.
  • Provide documentation for large deposits. Above we mentioned avoiding having large cash deposits, but we also realize this may happen from time to time. If it does, you need to make sure you have a legitimate paper trail to back up the transaction to counter any red flags raised by the lender. An example of this may be something such as liquidating some of your own assets for the down payment.
  • Provide documentation for transfers. Anytime you move large amounts of money from one account to another, record the transaction and send all documentation regarding this transfer to your lender.

Your entire financial life is scrutinized during the application process and you want to avoid setting off and red flags at all costs. During the final stages of the application, there are several other things you may have to do, such as getting a termite inspection report for the property, but these are things your lender can go over with you in person.

It is very important that you choose a lender that is upfront about these items as well as someone that will help you guide you through the process. We always refer our home buyers to North American Mortgage, as they have proven time and again they put our clients needs at the top of their “to do” list.

If you are ready to start your home mortgage loan application for pre-approval and find out how much buying power you actually have, click here.

Copyright: annuar83 / 123RF Stock Photo

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