Many first time buyers may not be familiar with much of the mortgage application process. There is some preparation involved, usually starting weeks or even months before a buyer decides to purchase a home. Here are 5 helpful tips for making a mortgage application that will end in success:
Five Tips For Making A Mortgage Application
1. Credit Scores Count. Before making a loan application, probably months before, do everything you can to shore up your credit scores. If you see an error on your report, get it corrected immediately. If you’ve made a late payment, contact the creditor to see if you can resolve the issue.
Sometimes buyers need professional help in credit enhancement. A credit specialist can make a difference in a relatively short amount of time. Sometimes hiring a specialist, who has the experience and knowledge of the credit industry, can make a big difference in your ability to get financing, as well as your ability to get better mortgage rates. (We know a very good credit specialist who has helped a few of our clients.)
You should be monitoring your credit report regularly. With each of the three credit bureaus you may have one free credit report per year, so getting a free report every four months is advisable. Checking for errors and fraud is now a task that must be accomplished regularly.
2. Be prepared with documentation when you apply. At the first meeting with the lender, they’ll give you a list of items you’ll need to bring when you make the formal loan application. You should bring everything they ask, and be prepared to supply more information later, if required.
Sometimes buyers get weary of the amount of paperwork that is often required. If you start to feel encumbered, remember that the lender is about to put a lot of money out and they want to be assured that you are creditworthy, and that the home is worth what they are lending. (Remember the Golden Rule – He who has the gold makes the rules:)
3. Disclose Everything when making a mortgage application. Lenders will find out everything, so it doesn’t do any good to withhold information, thinking it may not come out. The loan officer will submit an IRS form 4506 (tax return request) and will know all about your income and deductions. To ensure a successful loan approval, it’s better that they find out any issues early on, rather than along the way or even worse, days before settlement. Then they will have time to figure out how to handle the issue. Loan officers are problem-solvers. You might as well be upfront and avoid any last minute problems.
Here’s a good checklist of documents you may need when you apply for a mortgage: Mortgage Checklist, from Gene Mundt, American Portfolio Mortgage
4. Be Patient. Mortgage underwriting has become more complicated during these “post-bubble” days. It can take longer to be approved and it definitely takes more paperwork. Don’t add to the process with delays caused by dragging your feet on paperwork. The number one tip for making a mortgage application is timeliness.
5. Be ready to provide more documentation. Lenders often ask for more information, beyond what Fannie Mae, Freddie Mac or FHA/VA require. It doesn’t mean anything is wrong, or that your loan is in danger, necessarily. It just means the lender needs to document something else. Don’t stress about it and keep your eye on the prize.
Bonus Tip: Do not make any big credit purchases between the time you make loan application and settlement! No furniture, no cars, nada. These kinds of purchases will often knock your credit score down, just at the time when you don’t want to do anything to rock the boat.
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