When it comes to mortgage loans everyone wants a smooth clean process-the loan originator, the real estate agents and most importantly, the buyer and seller involved in the transaction. As a real estate professional I know that every transaction will have a set back or two, but how quickly and efficiently those problems are handled will make all the difference in how the client feels about their transaction. In some cases the client never knows as the lender and or the Realtor can come up with a solution. In other cases the client must be involved to obtain information or approve the step that will solve the problem. The fact is that we can head off many issues and delays at the pass if our buyer is informed up front and pays attention to what is asked of them. The following are a few tips that will keep your real estate transaction for going under.
1) Purchasing a home ideally is not an impulse decision. Some time and thought should be put into the timing, and the plan for purchasing a home, including accumulating the down payment, bolstering credit if required, and being sure employment is stable. If you have a parent or family member that is going to give you a gift for the down payment, it requires much less red tape and follow up if the down payment monies are deposited into the your savings account three months prior to the beginning of the home search. If the donor doesn't wish to give that much leeway prior to purchase, depositing monies prior to the loan application is best unless the donor doesn't mind having to produce copies of their own bank statements for the lender. The burden of proof required by the Patriot Act is less invasive if one of the two aforementioned things happens with regard to gifts.
2) If you don't know what is on your credit report, the day you want to write an offer is not the time to find out. Again, a little planning pre-purchase is a good idea. Any blots on your credit report should be dealt with prior to having your dream home under contract. The item that most often delays closings is dealing with a charge off, judgment, or collection that was ignored. If you don't have quite enough credit to qualify for a home you may be six months to a year too early. Begin taking care of your credit as soon as you have an inkling that you may wish to purchase a home in the future.
3) When you begin the loan process you will be given a list of items that you will need to bring to your loan originator to be included in the loan file. This is a list of required items - - there is no wiggle room in the list. A W2 is not the same as a tax return, pay stubs are mandatory unless you are self employed. Not being able to find something or it being too much trouble to dig through the box it is packed in is not an excuse the underwriter will accept.
"The dog ate my homework" excuse won't work for you any better now than it did in school if you can't find your paystubs or bank statements. The items we request are requested for a reason, not to make our customer's lives miserable. We can often give you an idea of how to obtain duplicate items if you have no record of something.
4) We all forget things from time to time-hectic schedules, the pressures of work and family can tend to get in the way of clarity. However, during a loan application we are required to document where you have worked, and resided for the past two years. So we need our clients to remember with accuracy when, where, and what they did. Discovering employment and residency gaps can slow things down. As the lender it is contingent on us to verify what you tell us on the loan application. So if during our verification process we run into an employment gap, or dates of residency that don't match up we have to go back and reconstruct where you were or what you did. That can take precious days as we are trying to meet a closing date-so be clear on employment and residency for the past two years.
5) One area on which we spend an inordinate amount of time and energy is tracking down large deposits in our client's bank accounts. A large deposit is typically defined as an unknown type of deposit that is 50% or more of the borrower's gross monthly income. So if you make $3000 per month, we would be looking at anything $1500 or more that was deposited in your account for the previous two months that isn't tagged on the bank statement such as "U.S. Treasury" or your employer's name. This has to do with Patriot Act, anti- money laundering and Homeland Security compliance. We don't do this just to give you a hard time, federal law requires it. Unsupported deposits have to be identified. Some lenders have lower deposit amounts than 50% that they will require us to verify; as low as $250. So if you have cash from your garage sale-we won't be able to use it for any expenses for your mortgage loan such as appraisal, down payment, or earnest money. All monies in a mortgage transaction has to be traceable. In the two months leading up to and while in the loan process keep cash deposits to a minimum.
6) And while we are speaking of bank statements, please give us all accounts that money will be moving to or from during the loan transaction. We don't always need every account statement. So if you have a money market account that you never touch and won't be used in the transaction, we don't necessarily need that. But if you routinely transfer money between checking and savings-we will need both those accounts.
7) The thirty or forty days you are in the loan process is not the time to be opening more credit accounts. Your loan eligibility is figured on your current accounts so adding new accounts can cause you to be declined for your loan.
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8) I also might mention that beginning a new career in the middle of the loan process is a very bad idea. If possible, do not make any career changes during your loan process. There are exceptions of course. If you are making a move within the same field as long as there are no probationary periods that have to be satisfied, you should not have a problem. But changing fields or changing from a salaried or hourly income to bonus or commission based income will cause your loan to be declined. Moving to a job that has a probationary period will cause your loan closing to be delayed. And don't think the lender won't find out. The day before closing employment is re-verified. If you aren't working where you are supposed to be working....no loan.
The same is true if you should quit your job. No job, no loan. I can't fix that. You would think that would go without saying but every year someone does it.
9) Throughout the process we will ask you for items to complete the loan file. While many times it may seem excessive, lenders have to be able to pass a Federal Audit of their files as well have their files complete in order to sell the loan to a different investor. A file that is incomplete may result in the lender having to obtain information from you after closing. So we will be asking for updated materials throughout the process. Please get us the information as quickly as possible. If you delay in getting us the item, you loan will be delayed. Often if it takes you several days to get something back to us, it will take several days longer to close out your file.
Lending requirements are more detailed than they were just a few short years ago. Some might feel the pendulum has swung too far in the wrong direction. That may well be true. However, the lack of lending rules almost sunk the global economy a few short years ago. We can still close loans in a efficient and smooth manner - the catch is there are no loop holes, end runs or blind eye that can be turned. By complying with requests from your lender and your real estate professional you can ensure that you should have the easiest process possible.
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