Lending requirements are starting to loosen, and gone are the days of overly stringent mortgage underwriting. While this remains… here are five things borrowers still do in the loan process that make things more dicey.
Co-mingling Gift Funds-let’s say you’re receiving gift monies from family to buy a home. You instruct your family member providing the gift funds to send the monies directly to your personal checking account. The same checking account you run your monthly ledger off of. The money is documented and paper trailed. Transferring money into your monthly spending habits account will look on paper as though you are spending your down payment. The least path of resistance approach is to have your family member providing the gift funds wire the funds directly into escrow. The escrow company is required to hold these monies for you until closing at which point those funds becomes a credit against your cash to close.
Undocumented Cash-Please keep any cash from “side jobs” keep out of the loan process. Undocumented money cannot be used. Even if the funds are there, the bank will ignore the funds if they are not substantiated. Banks do not readily make loans to mortgage borrowers who deal primarily in cash.
Applying For Credit- Once you have picked a mortgage company, and have begun the loan process, stop. Even if you get a sexy credit offer such as buying a car with interest free financing for five years or a zero balance credit card transfer, applying for credit or worse, taking on new debt in the loan process not previously disclosed may negatively impact your loan. Do nothing. Do not open any credit accounts, do not close any credit accounts, and do not dispute any credit accounts without the guidance of your loan professional. If there is some sort of credit offer you must have, handle it after you closing on your loan.
Lack Of Response- lenders understand you are busy, but so is everyone else. Moreover, you should try to manage your time accordingly to account for taking on the largest liability of your life. Timely regular communication within the mortgage loan process is crucial especially if you’ve decided to lock in your interest rate. A mortgage rate lock commitment is usually good for 30 days or 45 days sometimes longer depending on circumstances. This means the clock begins taking from the time the day you lock in. Taking longer than 48 hours to provide documentation to your mortgage company for resubmitting to underwriting for final loan approval could end up costing you hundreds, if not thousands of dollars in lock extension fees depending on how long the lender needs to extend your rate lock. In other words, just acknowledge there could be things requested in the loan process that might seem annoying, frustrating, redundant or tedious, but getting these things back to the lender within 48 business hours of the lender requesting those items helps meet closing time frames.
Tip: some mortgage companies do not allow you to extend your interest rate lock, but rather force you to take worst-case market pricing. Make sure to ask about your lender’s rate lock policy at or before loan application.
Questioning Documentation –every single residential mortgage loan entails submitting an application and financial documentation in a loan package to an underwriter for review. Every reviewed loan comes out approved with conditions or suspended (needing more information or a change needed to attain an approval). The loan approval says “meet these conditions and you will get a full loan commitment”. These conditions might mean explaining previous addresses, providing updated pay stubs, requesting verification of employment to name a few, but there could be many different reasons and/or conditions an underwriter places on your file based on their analysis of your complete credit, debt, income, and assets and financial history. Lending is pretty specific in terms of qualifying and documentation needed. More often than not, providing some alternative form of documentation the lender did not specifically ask for one not only makes the loan process take longer, but can cause more stress and frustration within the communication stream Simply put, if the lender is asking for something, provide it. Don’t fight it, argue it, or try to provide some other form of documentation as it likely will not work in lieu of. While this might seem a bit harsh, the time it takes to question a piece of documentation could have been greatly reduced if you just gave the lender what they originally requested. A good rule of thumb is give the lender exactly what they want in a reasonable time frame they have established.
Looking for a committed, and responsive loan officer dedicated to working for you? Get a free mortgage rate quote online from Scott today.
