The Do’s and the Don’ts of the Mortgage Process
When you’re ready to get a home loan, it can help to have as much information about the mortgage process as possible. That way you can take the right steps towards getting your loan, and hopefully avoid some of the more common pitfalls along the way. To help you reach your goal of homeownership, here’s a list of do’s and don’ts as you start with the process of getting a home loan and buying a home.
DO: GET PREAPPROVED.
DON’T: GO HOUSE SHOPPING WITHOUT KNOWING WHAT YOU CAN AFFORD.
When you get preapproved for a home loan, you can find out exactly how much house you can afford. This means hopefully you’ll avoid falling in love with a home outside of your price range when you start looking. And there are more benefits to getting a preapproval before shopping for a home; when you find the right one, you can make a stronger, more competitive offer with a preapproval letter since a lender has already verified your income and assets.
DO: WORK WITH HOME BUYING PROFESSIONALS.
DON’T: THINK YOU HAVE TO DO IT ALONE.
Consider the home buying professionals, such as the loan officers, real estate agents, home inspectors, and other professionals who will work with you during the home loan process, as your coaches. Each professional has their own unique skill set and experience, and together they all want to help you reach your end goal. You don’t need to be a mortgage loan advisor yourself when you have one of APM’s mortgage professionals by your side.
DO: UNDERSTAND YOUR CREDIT
DON’T: OPEN OR CLOSE CREDIT LINES WITHOUT CONSULTING A CREDIT PROFESSIONAL.
Before you begin the mortgage process, it’s a good idea to have an understanding of your overall credit picture. If you don’t know where you stand, you can request a free copy of your credit report (link is external) from each of three major credit reporting bureaus. If you see something on your report that is inaccurate, don’t ignore it. Contact the credit agency to resolve the issue. Avoid opening new lines of credit, closing credit lines, co-signing on loans, or making major purchases with credit before or during the loan process.
DO: KEEP THE LINES OF COMMUNICATION OPEN.
DON’T: BE SLOW TO RESPOND TO YOUR LOAN TEAM.
Expect to hear often from your team of professionals throughout the home loan process. Your loano officer will keep you up-to-date throughout the entire process, and provide clear communication every step of the way. If your loan officer asks you for additional documentation, be sure to provide it as soon as possible. Often times, the key to closing your loan on time is promptly providing your loan advisor with the documents a lender requests.
DO: MAKE A SAVINGS PLAN.
DON’T: MAKE MAJOR PURCHASES.
Think of this time as a time to focus on saving, not spending, your money. You may need funds available for things such as an earnest money deposit, a down payment, or closing costs. Don’t make any large purchases, such as a new car, boat, or furniture during this time — as these could affect your credit. A focus on saving, not spending, can help you avoid some of the mistakes more commonly seen during the process of getting a home loan.
DO: MAINTAIN YOUR CURRENT EMPLOYMENT AND INCOME.
DON’T: MAKE MAJOR CHANGES SUCH AS QUITTING YOUR JOB OR CHANGING JOBS.
Think “stability” immediately before and during the loan process. By keeping your job and income steady, and avoiding major changes such as quitting your job, you can help the process go smoother. If you do make a change, it could result in you needing a new loan approval, or even a denial. Don’t worry about getting a pay raise or a promotion, however; that’s the exception to this rule.
DO: HAVE A PAPER TRAIL FOR FUNDS COMING IN AND OUT OF YOUR ACCOUNT.
DON’T: MAKE LARGE CASH DEPOSITS INTO YOUR BANK ACCOUNT OTHER THAN YOUR PAYCHECK.
Mortgage lenders are required to document where your funds come from for earnest money deposits and downpayments, even if you are using gift funds. Be sure to have a clear paper trail showing how money is coming in and out of your accounts, and where it’s coming from. Avoid making large cash deposits (or electronic transfers) into your personal banking account that can’t be accounted for.
DO: KEEP GOOD RECORDS.
DON’T: BE SURPRISED IF YOU ARE ASKED FOR ADDITIONAL DOCUMENTS.
Mortgage lenders like to see documentation for things such as income, employment verification, and your current debts or obligations. You can help the process move along smoothly if you have good records to provide, such as W2s, tax return documents, paystubs, or bank statements. And if your mortgage advisor asks for additional documentation during the process, don’t be surprised. It may be something the underwriter needs to help you close your loan.
DO: ASK QUESTIONS.
DON’T: PANIC! (REALLY; IT’S GOING TO BE FINE.)
Your loan officer wants you to be feel knowledgeable and confident about the mortgage process. Ask as many questions as you’d like until you understand it. And don’t panic! The loan process may seem confusing, or even scary, but your advisor is here to help you get to the finish line. If you trust in their expertise, keep the lines of communication open, and learn what you can about the loan process, you may even find that it’s less complicated than you ever imagined.
HOW TO PREPARE FOR THE MORTGAGE PROCESS
Here are some of the documents you may be asked for when you want to get a loan:
- 2 months of most current asset statements for all accounts, including blank pages
- 2 years W2’s
- 2 years Federal tax returns with all schedules
- Recent (30 days) paystubs
- Most recent statements for retirement accounts (IRA, 401K, etc.)
- Copy of Driver’s License or other proof of identity
- YTD Profit and Loss statement for self-employed borrowers
- Mortgage statement for all properties owned
- Homeowner Insurance for all properties owned
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