The intricacies of securing a loan to finance your home can feel overwhelming. As mortgage broker's we are here to help explain the loan process, provide input and guidance and help our clients close successfully on their home. Informed Borrowers can feel confident throughout each step of the purchase process. Today we wanted to share a little information about the mortgage approval process and some key things not to do when you are buying a home.
Pre-Approved? What next?
A pre-approval is a preliminary review of your finances, debt and income. This helps the lender decide if and how much they may be willing to lend. With a loan preapproval in hand, buyers may think closing is guaranteed - BUT - a loan is not finalized until closing day! The lender will be reviewing the documentation and verifying your finances, employment and debt in the days or weeks leading up to closing.
This is a time to stay focused on your financial goal of home ownership. Ensure you talk with your broker before making any career moves, money moves, large purchases, or payoffs - as any of these could have a major impact your loan.
Here are a few specific things to to avoid if you want to sail smoothly to the closing table.
6 Things NOT to do during the mortgage process:
1. Don’t apply for new credit.
Applying for other credit lines and loans can impact your credit score and accumulating more debt can affect DTI – a key factor lenders evaluate when you apply for a mortgage. Don't take out a personal loan, car loan, furniture loan, etc. Wait a few weeks until you close on your home.
2. Don’t miss credit card and loan payments.
This is typically a bad idea at most points in life, but especially important during the loan process.
3. Don’t make any large purchases.
It can be tempting to start purchase appliances, furniture or other big ticket household items to prepare for home ownership. Paying cash will dent your savings, and charging substantial purchases will increase your debt-to-income ratio and credit utilization – both could have a negative impact on your future mortgage. Once you close, you will have plenty of time to shop to your hearts content and make your home your own.
4. Don’t switch jobs or quit.
This may be out of your control, especially in these crazy post Covid days, however; if a career change is part of your plan, it's best if it doesn’t happen until AFTER you close your the loan. Many lenders are required to do a verification of employment just prior to funding (day before or day of). The loan will be at an extreme risk of failure if your employment status has changed.
5. Don’t make large deposits without a paper trail.
If a loan officer sees large deposits, typically over $1,000, they must be able to trace their origin. Transfers between accounts and payroll deposits are generally fine, but any deposits that are not easily sourced must have an explanation. Last minute gifts and required letters can also cause delays if they come late in the loan process. If you are planning to buy in the near future, it streamlines the process to have any cash or reserves in the desired accounts prior to starting the process.
6. Don’t ignore questions from your lender or broker.
You may be busy, working, lack email access or just figure it can wait a few days, but remember that the broker is working hard to finalize your loan and allow you to close on schedule. The current economy has led some lenders to implement additional requirements that require documentation or explanations. Keep the communication lines open and do what you can to assist your broker and processor in completing your loan conditions.
In Review
A pre-approval offer from a lender is based on an initial evaluation of your credit, income, debt and assets. If those things change before final approval or cannot be verified, the loan will likely not close. Stay focused on the long game during the process to help ensure you close your loan and get to move into your new home!
Ready to buy your next home or property? Want to lock in a low rate & monthly savings with a refinance? Work with a Local Mortgage Broker!
Local Expertise. Great Rates. Personalized customer experience. Call Simplicity Mortgage 386-401-9000 today!
Simplicity Mortgage is a local mortgage broker company located on 411 Dunlawton Avenue in Port Orange, Florida. We serve borrowers looking for loans in the central Florida to include Volusia and Flagler counties, Palm Coast, Ormond Beach, Ormond by the Sea, Deland, Daytona Beach, Daytona Beach Shores, Port Orange, Ponce Inlet, New Smyrna Beach and all surrounding areas.
Simplicity has a portfolio of over 20 lenders, which allow us to find the best home loan product for a borrowers unique purchasing scenario. Our mission is to provide a simple and smooth customer experience coupled with an excellent rate and low fees. We are your accessible, single point of contact throughout the process. We offer a full suite of loan products: Conventional, VA loan, FHA loan, USDA, Jumbo, Non Qualified Mortgage (non-QM), Self Employed, 1099, first time home buyer, investment, and secondary property purchases. We have excellent options for your refinance as well, IRRRL, Home Equity Loan, Streamline Refinance, Cash Out, Rate and Term.
Give us a call today to discuss current mortgage rates. We will utilize our mortgage calculator to assess the mortgage payment with various mortgage rates for your home loan to help you determine the best financial fit for your purchase.