Applying for a Mortgage is Serious Business
The rules are important and not to be taken lightly when applying for a mortgage
Yes, there are already all kinds of equally crucial rules to follow concerning home buying which have to do with the home itself, neighborhood and the impact on your current life such as proximity to work. But mortgage lending, especially in an environment where interest rates are "ratcheting" slowly upward (three steps up, two steps down, two steps up, one step down, etc), has a very important set of rules which must be followed to make sure you are really able to step into the home which you are likely to be pursuing with competition at your heels. The rules are the same for refinance mortgage loans; even without the time urgency of a low inventory market like the one we will still have until at least summer 2014, the urgency is there for rate locks and the threat of still-overcompensating skepticism from mortgage underwriting. I can tell you from first hand experience the anguish of all parties when a problem which could have been avoided ends up derailing a transaction. Here are the fundamentals one should remember when applying for a mortgage loan, heed them well.
Employment
Have you ever felt like up and quitting your job because you are so fed up for whatever justifiable, rational, perfectly understandable reason? Great. Do it after you close your loan; until then, do what you have to in order to make it to the closing, however intolerable your working conditions. Similarly, nothing can be more flattering and exciting than having a more favorable job opportunity fall on your lap. Wait to jump ship until after your loan closes, even if the income or other aspects of the job change will make you look more favorable for underwriting. Just avoid rocking the employment/income boat if at all possible from the time of taking an application to the time your loan funds.
Credit Activity
Don't buy anything new, or originate any new "trade lines" as they are called on your credit report. I mean any line of credit including debt secured by furniture (especially for a home you do not yet have); a car, truck, van, plane, boat, tractor, jet ski or recreational vehicle of any kind. If this rule is followed correctly, the following rule should be followed by extension: no credit inquiries of any kind either. A minor exception: regarding (what is currently thought to be) a 30 day window for multiple mortgage inquiries, considered by the credit bureaus (Experian, Equifax and Trans Union) as one inquiry. This takes time to "reset" and bear in mind any inquiries outside the 30 day time frame will at least require a letter of explanation and an unnecessary opportunity for an underwriter to find fault. A final and seemingly obvious but often forgotten piece of credit wisdom; during your loan application process, don't "co-sign" for any financing for anyone.
Income Trail
Yes, it's a shame I have to mention these, but there are often all-too-overlooked rules regarding your income and savings which must be adhered to in the mortgage loan process as well. Some of you may be surprised how often these rules in particular are ignored, and how quickly a transaction falls out because of not following income trail rules. Do not make any large deposits into your bank accounts (at least not the ones you are using to qualify you for the loan). Similarly, don't change the bank account or accounts you are using to qualify for the loan. Lastly, don't spend the money you have saved for the down payment. When the mortgage lender goes to verify your funds to close the loan and nothing is there, you can be certain things will go wrong.
Following these rules won't guarantee your loan closing, but not following them will most certainly guarantee your loan will not close. Contact me if you have any specific questions and want to make sure you are prepared to keep and maintain your credit and income profile through the entire loan process.
No comments:
Post a Comment