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I have spent nearly 15 years consulting borrowers on mortgage financing. In that time, I have seen a great number of scenarios and questions come up after people have received their pre-approvals. Some issues have derailed their plans for a new home while some small mishaps have been easy to navigate around. All of them, however, have caused additional documentation and worst of all, additional time in the process! Let’s look at a few do’s and don’ts to keep in mind AFTER you receive your pre-approval.
1. Continue to make ALL of your payments on time. Nothing will jeopardize a pre-approval quicker than a recent late payment on your credit report. “I thought I would have been moved out by now” is not an excuse an underwriter wants to hear when they find you have a collection account from your cable company.
2. Keep saving money by putting it into your “current” accounts. (Will talk more about bank accounts in the “Don’ts”)
3. Communicate any potential changes in employment, assets, or your credit situation with your Mortgage Loan Officer. They can help you understand how a change may affect necessary documentation or how to prepare letters of explanation when necessary.
4. Try to be understanding. Your loan officer is not making their own list of documents they think you should submit. The investors (Fannie Mae, Freddie Mac, FHA, etc.) have their list of necessary items depending on your financial and credit profile. Things can change depending on what certain documents tell us. In essence one document could contain information that makes it necessary to get yet another document. Mortgage Loan Officers don’t like it any more than you do. The quickest and easiest way to arrive at the closing table is gathering all you are asked for as soon as you can.
5. ASK QUESTIONS!! This is very important. You should have an understanding of every step in the process and why someone is asking you for a document. (Yes, we do need ALL pages of a bank statement, even if they are blank! Why? Because an underwriter doesn’t know the page is blank unless they have it!!)
6. Tell your Loan Officer the full story. We all have things in our past that we would rather not tell a stranger. We are not there to judge you or your circumstance. You will be surprised at how many of us can give you guidance from our own experience both professional AND personal. Give us a chance to listen.
1. Make any debt payments more than 30 days past their due date! (See DO #1 above!)
2. Apply for new credit or make a large purchase. I always tell borrowers they can look through the furniture store window and pick out what they would like, but they can’t go inside until their loan is closed! New credit can negatively affect your credit scores and a large purchase can affect your assets needed for the transaction. (Exceptions exist if it is a necessity for work, health, etc. Always discuss these circumstances with your Mortgage Loan Officer)
3. Quit your job* or decide it’s time to start your own business. This seriously affects your continuation of income and could cause you to wait until you have more than a year of self-employed tax returns. (*Unless it is a promotion and is in the same field or profession)
4. Open new bank accounts or move your money around. You don’t need to open the “house savings account”. With the Patriot Act and other money laundering laws in place, lenders must scrutinize a borrower’s assets to ensure they are truly being generated through their income sources. Moving funds around in new and different accounts will need to be tracked and possibly sourced. Keep putting your paychecks in your current accounts. And please, no “mattress money”. All cash deposits need to be sourced and could potentially lead to having these funds not being eligible for the transaction.
5. Give your landlord the date you plan on moving out. You haven’t found a house yet, gone to contract, or even come close to setting a closing date.
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