What NOT to do during your loan process
published on 02/07/2014
You found your dream home, made an offer and it was accepted, yeah! You have already applied for a mortgage and your loan officer said it looks as if you would qualify. Closing is a few weeks away and you are eager to move in.
One of the most exciting times in our lives can also turn out to be the most stressful. Your mortgage isn’t final and it’s possible that what you do from pre-qualification to final approval could affect the outcome of your final underwriting approval. Here are some suggestions of what NOT to do as well as what you should do during your loan process.
DON’T take on any new debt.
I realize that with a new home comes the desire to purchase new furniture, appliances, and sometimes even a shiny new car for the garage. There are some stores that offer no-money down and 0% interest credit that makes it tempting to start purchasing. By taking on new debt it could raise your debt ratio (the relationship of income to debt). Banks and mortgage companies weigh this number heavily to determine your credit worthiness. Raising it could cause heartache at the end of your transaction. Loan officers do another credit check a few days before closing to verify no new debt has been obtained.
DON’T Change Jobs.
The stability of your job and income are essential to your loan approval. Your capability of repayment is ultimately what the lender needs to see. Changing jobs during the purchase process could complicate things. For example, if switching from a W-2 salaried status to a contractor or full commission job would most likely disqualify you (that income typically needs two years of income for calculation). A bank typically needs 30 days on the job, at least one pay stub and time verify employment. Verification of income is sent to the employer to make sure the income matches the paystub and that you are still employed, as well as a verbal verification a day or so before closing.
DO pay your bills.
A new home purchase can become expensive when you are out closing costs that aren’t part of your typical monthly obligations, plus other cost of movers, etc. Even if money gets tight, pay your bills! Remember, loan officers will re-pull credit at the end of the transaction.
DO keep your important papers handy & respond to loan processing requests quickly.
You’re stoked about moving. Maybe you’ve already started packing. Make sure you don’t pack up tax documents, bank statements, paystubs, or any other important documents that might be requested by your loan officer. The quicker you can respond to the processing requests of your loan, the quicker it will be approved. Delaying the response can delay closing.
Buying a home is exciting, but until you sign the papers at closing, your mortgage isn’t final. Loan officers issue a pre-qualification based on the documentation you provide. The final approval is issued on documents retrieved between signing the contract and loan closing. The final underwriting decision is made on a final credit review, tax transcripts, verification of employment, and verification of deposit, NOT the initial credit, tax returns, paystubs, and bank statements.
Loan officers are here to make this process as smooth and as simple as possible. Be open with your loan officer and make sure they completely understand your situation and that one of the above doesn’t become a gotcha moment.
I’m happy to answer any questions you might have about mortgages, even if you are not an RCB Bank customer. Call or email me at 405-608-5291, email@example.com.
Opinions expressed above are the personal opinions of Kenneth Wohl and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call us at 855-BANK-RCB. Member FDIC and Equal Housing Lender.