Getting pre-approved for your mortgage is a HUGE first step. It’s basically telling you that you can afford a home. It’s a nuclear bomb in your arsenal and lets sellers and agents know that you’re serious. However, this isn’t the end of your financial paperwork, and doesn’t mean that you have everything secure. There are still lots of hurdles to get over. Here are 8 things to keep in mind in that period between pre-approval and signing the final documents
Keep Your Car Until You Move In
Here’s a phrase that you’re going to hear A LOT during this article. DEBT-TO-INCOME RATIO. This is one of the most important factors to keep in mind during the entire process of applying for your home. Make sure that you don’t add MORE debt to what you currently have, or it triggers red flags during the process. We’ll run your credit during your application, but we will also check again before we settle, to make sure that nothing drastic has happened. If you buy a new car and add a lot of debt to your account, it can skew your credit and force us to have to adjust the mortgage. Wait until after you sign on the dotted line, guys.
Don’t Start That New Job Yet
One thing that mortgage companies like us love to see is STABILITY. We want to know that you are set in your job and aren’t going to move around, because we want you to pay off your mortgage. Certainty in your position is a huge factor in your mortgage, and if you suddenly switch careers, or start a new company, your capital issues change, and we have to readjust your application to match it. This can cause your interest rates to change as confidence in your ability to repay your loan may decrease.
Keep That Steady Paycheck
This is a similar reason. Even if you’re going to make more money right away, a new, heavily-commissioned job scares mortgage companies. Going from a guaranteed paycheck to one where you can make wildly different amounts from month to month is a gamble, and not one that mortgage companies like to get sprung on them after they’ve already seen your steady paycheck.
Let Your Money Settle
Let your money settle. Banks and mortgage companies do not like to see your money moving around after we approve you for a mortgage. It doesn’t inspire trust to see thousands of dollars moved around. The lender will also sometimes verify your cash reserves to ensure that you can pay the closing costs associated with the mortgage so keep your money where it is.
Keep Your Bills Current
Even if you are disputing a bill, pay it if it is going to become a late payment or another strike against your credit. These are credit poison, and we’ll see them when we do our check before the final approval of your mortgage. Your mortgage is a constantly changing number that needs to be monitored. Don’t let a bad bill keep you out of your dream home!
No New Credit Cards – No Matter What the Deal Is
We get it. You’re moving into your new home and you want to have everything ready to move in. Don’t do it! Even if you’re going to score the best deal ever by filling out a credit card to buy your furniture and appliances, more debt is more debt! You need to keep your Debt to Income Ratio as low as possible throughout the application process. If it changes appreciably – we have to reassess your credit score and it can affect your final application.
Fill Out Your Gift Paperwork
Many parents give a gift to their children to make their first down payment on their homes. However, this is an asset that has to be logged and taxed properly. There are different rules for how the down payments for each type of loan can be used.
- If you put down 20% or more, it can all be from a gift.
- If you put down less than 20%, part of the money can be a gift, but part must come from your own funds. This minimum contribution varies by loan type.
You can only use gift money on primary residences and second homes.
FHA and VA
All of your down payment can be gift money.
If your credit score is between 580 and 619, at least 3.5% of your down payment must be your own money.
You can only use gift money on primary residences.
You also will want the gifter to send a Gift Letter – a letter explaining that this money is a gift and not a loan. You’ll want them to include:
- The donor’s name, address and phone number
- The donor’s relationship to the client
- The dollar amount of the gift
- The date the funds were transferred
- A statement from the donor that no repayment is expected
- The donor’s signature
- The address of the property being purchased
Mortgage companies want to know where your money comes from, so that they know if you have any debts that may not show up on your credit report.
Keep Paperwork For Any Deposits
If you DO receive any money you need to make sure that it’s documented thoroughly. If you sell your car, receive an inheritance, or win the lottery, that’s great! However, it needs to be documented properly. If you sell a car, you’ll need at least the report of sale. Having the ad you used to sell it and the Kelly Blue Book to show the value don’t hurt, either. If you received a payment of an old debt, the cancelled check may be enough, or a letter from the payer may be required. If your company doesn’t do direct deposit, be ready to show check stubs for your paychecks. Why is this important? Because your lender wants to know for sure what that money is. If it’s a loan, they’ll find out. Just be honest, because hiding a loan from your lender is fraud.
These are all ways that you can keep yourself from losing out on your mortgage. Keep these in mind as you apply and search out your home, and you’ll be fine. When you’re ready to apply for your mortgage, apply online at www.thehomeloanexpert.com and we’ll help you through every step. Nobody makes it easier to buy a home or refinance than The home Loan Expert, Ryan Kelley.