Homebuyers are often not aware of how an innocent transaction such as making a credit card purchase or moving cash from one bank to another can jeopardize the mortgage pre-qualification process. Please be aware of the common areas that need special attention:
- Review your credit report:
The best way to get a jump start on your mortgage process is to know what your creditors are saying about you and the accuracy of the information! Review the report with your Loan Officer and report any inaccurate or omitted information.
- Credit cards/new debt:
Do not apply for any new credit of any kind! That creditor will show up on your credit report, and the lender will have to verify there is no new outstanding debt. If you are planning to add a debt or pay debts off for closing, wait until you have spoken with your Loan Officer. A paid debt may not show on your credit report, and the lender will have to re-verify each creditor’s current balance, which takes time. It may be possible to pay off those debts at closing, with no effect to your approval process.
- Don’t move cashing/savings around:
Lenders have to verify all funds for closing, including the source of those funds. Moving assets around can create a paper trail nightmare. The best advice is to leave everything where it is, even if the purpose of the move is to pool your funds for buying the house. After your accounts have been verified and the lender give you an “ok”, you can consolidate your accounts if needed.
- Large deposits:
All sources of funds for the transaction must be verified. The lender will be looking at any large deposits into your asset accounts (checking, savings, money market, etc.). You should be prepared to document the source-such as a copy of the paycheck, bonus check, money from the sale of an asset, etc.
- Do not pack financial papers:
Keep all pages of your tax returns, along with any W-2’s, 1099’s, or K-1’s and any other financial papers from the past two years in a handy place. If you sold a home in the past two years, have your (HUD-1) Settlement Sheet handy. You may have to provide more items, which your Loan Officer will outline.
- Become a paper hound:
Save all pages of all bank statements and pay stubs from now until closing. The lender will need these, so please make sure you keep them handy!
- Changing jobs:
While a different career opportunity can be an exciting venture, it’s best to wait until the mortgage process is complete if possible. A new position could derail the financial information you originally provided and jeopardize loan approval. If you need to change jobs, make sure you let your Loan Officer know so adjustments can be made.
Gifts from relatives are very common in the purchase of a home. However, there are specific ways a gift must be handled to avoid a paper trail nightmare. If you are receiving a gift, hold off on accepting the funds until you have spoken with your Loan Officer. There is a Gift Letter form you may use which provides instructions.
- Selling something?
If you are selling an asset such as a car, an antique, or baseball card collection to come up with the cash for closing, make sure you document the asset. For example, if you purchase a car, obtain the check from the buyer, car title and a bill of sale. You may need to get a certified appraisal for the item.
When in doubt, always consult your Loan Officer. He or she will help guide you through the process and answer any questions you might have along the way.