Obtaining a mortgage can be a complex process with a lot of moving parts and it’s the job of your loan officer and lender to help guide you through and make it as smooth and painless as possible. There are, however, some steps you can take and activities to avoid that can help keep your loan process on track.
Pamela Bates, Underwriting Manager at Castle & Cooke Mortgage, LLC® (NMLS #1251), provides the following five tips.
1. Do not apply for or take out new credit in the middle of your loan process.
Your debt ratio has a significant impact on your ability to qualify for a mortgage. And just because you have been pre-qualified or approved for a loan, does not necessarily mean you are free and clear. The home isn’t yours until it has closed and funded. As such, this is not the time to apply for a new credit card, auto loan or take out any other kind of credit. Doing so could result in the denial of your mortgage loan.
2. Avoid quitting or changing jobs.
Another financial factor in your ability to receive a mortgage loan is proof of income. Your lender will verify two years worth of employment history as an indicator of the likelihood that you will have the income necessary to make your mortgage payments. Quitting your job right before you apply for a mortgage, or in the middle of the loan process, may prevent you from securing financing or make you ineligible for more preferred programs. You should also avoid making a job change during this time, if possible. In the event that a change in employment is unavoidable, let your loan officer know as soon as possible and he or she will be able to discuss your options.
3. Be careful not to take too much time off work.
In addition to verifying your previous two years of employment history, your lender will also require you to provide your most recent two pay stubs. If your employment history suggests that your income is based on working 40 hours a week but your pay stubs do not consistently reflect that, your loan process could be delayed or your application rejected. So resist the urge to take unpaid time off for house hunting or vacations during this process.
4. Do not make large deposits to your bank account(s) during your loan process.
This tip may seem a little counter-intuitive – you want to boost your account balances to prove you can afford your loan, right? Not necessarily. Among the documents you submit to your lender with your application will be two months’ worth of checking and savings account statements. This gives your lender a realistic look at the cash you have on hand. Any abnormal or large deposits made during that period or during your loan process will require further verification and delay your loan, as your lender has to verify the source of your down payment to ensure it meets with your loan program’s requirements.
5. Be organized!
As you should now be aware, you will have to provide a number of figures and documents to your lender when you apply for a mortgage loan. While less information is needed for an initial pre-qualification, it is important to note that your full application cannot be underwritten until you have submitted ALL of the requested documents. Because an underwriter can’t start working on your file with partial information, it is critical to have all of your documents collected and organized to avoid unnecessary delays that could ultimately cost you your loan.
Here is a helpful checklist of the documents and information you typically will need to provide:
- Copy of Driver’s License and Social Security card for all applicants
- 30 days’ most recent paystubs for all applicants
- Two years’ most recent W-2 statements for all applicants
- Two years’ most recent tax returns for all applicants (all pages)
- Two months’ most recent bank statements (all pages)
- Most recent statement for 401(k), IRA or other retirement accounts
- Awards letters and 1099s for any Social Security, pension or disability income
- Copy of divorce decree (if applicable)
- Copy of bankruptcy discharge (if applicable)
- Name and telephone number of your real estate agent
- Name and telephone number of your homeowner’s insurance agent
- Copy of your purchase contract (once received)
- Copy of your cleared Earnest Money check (once received)