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8 Expert Tips to Help You Simplify the Mortgage Process
1. Continue paying all your bills on time. Your credit history is one of the most vital elements of your mortgage application. Some loans may ask that lenders re-pull credit before the loan process is complete. For example, if you are applying for a conventional loan, your credit will likely be pulled again before your loan is funded. The lender needs to verify that your credit score still falls within the required parameters. If you fall behind and forget to pay bills on time, your credit score could drop. This could increase your interest rate or even make you ineligible for a loan. Even if you’re in the process of refinancing and will reduce your credit card debt in the process, you must keep paying your bills and debts as scheduled.
2. Don’t apply for new credit while going through the mortgage process. Makes sense, right? But it happens all-too-frequently, particularly with refi’s. Why? In a lot of instances, people looking to refinance an existing mortgage are looking for more cash. Whether it’s to pay down debt or fix up the house, it’s easy to want to look for cash from multiple sources. But don’t do it! Applying for new credit leaves a mark on your credit report and taking the credit you’ve received impacts the amount you can borrow, and can even disqualify you outright. Hold off on applying for or accepting offers for credit until the mortgage process is complete.
3. Make sure you have your money ready is my most important tip. In most markets in the country, home’s priced up to the median price point in their market are on the market for sale for less than 30 days. This means they are hot and things are moving. If you want to make sure you first get a shot at a home and then close smoothly. Start of by making sure your Money is ready. If your using cash make sure its in your account ready to go and you have a letter from your bank verifying it. Moving it from a 401k or a trust can take allot longer than you realize. If your getting a loan, find a lender that can give truly pre-qualify you. What does that mean, that means they pull your credit, you give them your last two bank statements and last two payroll stubs and you do a complete loan application. Most lenders give you a simple look through, ignore that look for someone that will give you a full evaluation of your situation.
4. Changing jobs hurts the home buying process. The home buyer should not change jobs, become self-employed or quit. If a mortgage applicant changes jobs before closing, he may have to wait a certain amount of time before he will qualify for a home loan again. Lenders normally want to see a two-year employment history within the same field. Even if the new job is in the same field, a lender will want to wait until at least one pay stub is received to verify income at the new job, causing delays to close.
5. Do your research on banks, credit unions and loan officers. Some who offer mortgages may advertise a one-stop-shop approach, where the consumer can handle the entire process through one entity without having to find a realtor, an attorney, or any outside businesses by themselves. While this sounds like a convenient solution, it’s set up that way because the financial institution has a CBA – Controlled Business Arrangement – with the realtors, attorneys and other participants in this mortgage. This means the buyer will have little independence in the home-buying process. It also means the bank or credit union can take a portion of the commissions of all of these businesses. These companies now have an invested financial interest in getting the consumer to close quickly, and that interest can cause impaired judgement. The company’s ability to look out for the customer’s best interest becomes compromised. Unfortunately, when something like this occurs, consumers are rarely informed. One way to avoid being rushed into decision is to research your loan officer. Any licensed loan officer will have an ID number that you can access through NMLS Consumer Access. On this site, you can see how long they’ve been in business, where their license is valid and, most importantly, if there have been any complaints filed against them. Once you have a trustworthy loan officer, it is important to consult with them before hiring a realtor. A realtor who is only interested in getting paid can very easily turn a blind eye to issues that could cost the consumer money.
6. It’s never too early to speak to a loan officer. The BEST advice for everyone is to meet with a competent, experienced mortgage advisor well before you want to start shopping. They can help assess where your strong suits are and what you need to work on, and help you refine what kind of mortgage you can qualify for or want. Six months before you want to start shopping is NOT too early.
7. Start doing your research and get pre-approved BEFORE you start the homebuying process. If you know you’re going to be buying a home within a year, its not too early to get started. Do your research on local mortgage providers. Look up reviews, talk to your friends who have recently bought homes, and learn about the fees that different mortgage companies charge. Then, once you find a reliable lender to work with, get a pre-approval letter so you know how much you can afford to spend on your new home. This will make you a more competitive buyer because it shows sellers that you are a serious and trustworthy buyer. It will also save you lots of time (and headaches) once you go under contract on your dream home. And you can obtain a pre-approval letter in one day!
8. Gather all of the required mortgage documents. There’s a lot of paperwork involved in the mortgage process. Below is a list of documents you’ll need to get a mortgage loan:
W2’s for last 2 years
3 previous months of Bank Statements
Tax returns form previous 2 years
Cancelled rent checks
Additional income proof
Being able to supply your loan officer with all of these documents in the beginning phase of the mortgage process will streamline things.