Getting your paperwork together for a mortgage application can seem like an endless process. Your lenders need to document every bit of income you have in order to build a case that you can repay the loan. Even those monetary gifts from grandma seem to get inspected under a microscope.
And, after it's all complete, you certainly don't want your loan to fall through. To help you avoid having that happen, here are some tips from mortgage experts to keep the process going smoothly.
1. Watch Your Spending
Keeping an eye on your spending includes racking up more debt or making any big purchases. Now isn't the time to shop for new furniture or get a new car to match your new house. When lenders track your credit usage during the mortgage application process, balance increases can have a negative impact on your approval, Josh Lewis, a mortgage adviser at BuyWise Mortgage in Anaheim, California, said in an email. (If you're curious about where your credit stands, you can get a free credit report summary, updated every 14 days on Credit.com.)
2. Don't Borrow From Your Credit Card for the Escrow Deposit
This also sets off a big red flag for lenders, because it appears as if you're already borrowing money to make a payment. "Credit card advance funds are never an acceptable source of funds," Lewis said.
3. Keep Your Cash Deposits to a Minimum
You might think you need to fluff up your bank balances before applying for a mortgage. But, if you're going to do this, you probably don't want to use cash. Each of your large deposits needs a source and cash can be seen as too mysterious. For example, Lewis said he recently worked with a hairstylist who made a lot of cash deposits she received from work into her bank account. When a loan underwriter reviewed her bank statement, each deposit had to be accounted for, which made it more difficult.
4. Don't Change Jobs & Maybe Even Stall a Promotion
New jobs, becoming self-employed or even a promotion that is a lower base but higher commission could all put your mortgage into jeopardy, Lewis said. "Nearly every loan type requires a two-year history of commissions/bonuses/overtime," Lewis said.
5. Avoid Getting Another Loan
It's a good idea to hold off getting any other loans or lines of credit, as adding more credit to your profile may make you appear more risky to potential lenders. You also want to be upfront about any loans you've co-signed. "When borrowers fail to disclose they are a guarantor on another loan — this can dramatically affect the debt-to-income ratio which can quickly lose a home loan," Trisha Bousfield, team member of Magilla Loans in Sacramento, California, said in an email.
6. Stay Married
The mortgage process can be stressful, and sometimes a spouse is unaware that their partner is planning to file for divorce in the midst of it. Doing so during the loan process could potentially ruin the mortgage application, Bousfield said. A divorce could mean an income split, or having to pay alimony or child support — all extra expenses that may have to be noted on the application.
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