Today's mission is all about repetition. I am going to go over some ground that I have been over in past blogs. Not only frequently asked questions but situations that occur due to potential clients not knowing the rules of the road where mortgages are concerned. And to be totally fair-the rules have changed substantially.
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* Large deposits of cash going into bank accounts are a no-no. By and large I am talking about 25% of gross monthly income. If mom and dad want to help and give you money for closing costs and down payment it is considered a gift and will have to be documented as such. Which also means getting information about the donor's bank account and what's in it.
*Insufficient funds checks or debits are never a good thing. Every once in awhile we all have the balance of our bank accounts get away from us-but it shouldn't be a habit. Overdraft protection is not the same thing as not over drafting. Protection is great-saves you a few bucks in penalty fees but writing more in checks than you have money to pay them out of your checking account results in NSF posting which lenders don't like to see. When the payment is due, they want the money. Inability to manage your bank account isn't the most endearing thing an underwriter is going to want to learn about you.
* Even if your loan is VA or USDA and has no down payment requirements, you still need to have some money to obtain your mortgage loan. Usually around $1000 for inspections, appraisal, and earnest money. I also suggest that you take the time to try to build some savings for emergencies. When you own a home, the repairs are on you.
* How soon can I close? Every borrower wants to know the answer to that question as for their purposes, the sooner the better. Unfortunately, mortgage processing does take some time. While consumers may wish that the lender, appraiser, and title company would all work faster, the fact remains that the Federal Government in its attempt to ensure that loans are as transparent as possible has stepped in to slow the process down. There are currently required periods of time after financial disclosures are made, appraisals are disclosed and the final settlement statement is issued. For an uncomplicated conventional, VA or FHA loan, typically 30-35 days is enough time to process the loan-assuming no appraisal, title or credit issues that have to be resolved. USDA closings are all over the map-USDA is seriously undermanned which means they tend to get backed up during the portion of the selling season. Further issues can occur due to the fact that generally speaking there is no "staff up" times for lenders during the busiest period of the year. Training, educating and licensing industry professionals such as appraisers, loan originators, underwriters and processors takes time and a considerable financial investment. Lenders won't makes those investments only to lay people off in September when the flow of transactions slow down.
* Documentation requirements- these seem excessive to some people, and if compared to what was required just 6 or 7 short years ago they are excessive. But given the world of hurt that lack of documentation got us into, I suppose having to prove where you work, how much is in your bank account, that negative credit accounts have been settled and where your money is coming from is not such a bad idea.
* Pay your bills on time. This sounds pretty basic but it is not at all uncommon to have folks turn up that haven't met a bill they ever paid and still think it is unfair that they won't be approved for a mortgage.
* You must have a job. Again-basic information. And I don't talk to many people that are actually unemployed at the time they wish to purchase a home...but some have only been on the job a couple of weeks. Not that a new job means you can't get a loan-as long as it is in a line of work that you have been doing, all probationary periods have been fulfilled, and your job history is fairly solid. 6 months here, 2 months there probably won't work if you have just begun a new job. Schooling counts as experience so if you have a two years technical degree in mechanical design let's say-and your new job is in mechanical design-your course work counts as work history. With employment there aren't one size fits all rules. It can vary program to program and lender to lender.
As an addendum to 'you must have a job' if you receive child support, disability, social security or retirement income that counts as income-so there are some situations in which you do not have to have a job. However, unemployment compensation does not count as income that can be used as qualifying income.
* Pre-Approval-if you don't want to waste valuable time be sure to become pre-approved prior to beginning your home search. Once pre-approved you know you will be shopping in the right price range, have a good shot at actually being approved for your loan and will have the ability to provide your real estate professional with a letter from a mortgage originator (preferably one from Tippecanoe Mortgage) that a lender has at least reviewed your financials and your credit. Sellers will not consider your offer without it.
That's for today's review. It all goes a long way to assist you in being ready for a complicated process. And, once prepared makes things go much easier.
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