Buying a home is considered one of the most stressful events in the average person’s life, but it doesn’t have to be that way. Read on for simple steps you can take to avoid unnecessary frustration and delays.
After you complete your loan application and submit your documentation, the loan officer needs time to review what you have submitted and make sure nothing is missing. He or she might have questions about your paperwork.
For example, your application might state that you make $6,000 per month while your year-to-date pay stub doesn’t match up exactly. Your loan officer or loan processor would then call or email you asking about the discrepancy. The lender can work on other parts of your loan application while awaiting your response, but when there is a question about income, the lender can only go so far. The longer you delay your response, the longer it will take the lender to process your application. You might even miss your settlement date!
When asked to clarify something about your application, respond quickly and clearly. If you have documentation to support your claim, always send it to your loan officer.
Review Your Credit In Advance
It’s easier than ever these days to get a free copy of your credit report. You really should review it annually, looking for any errors. Many credit card companies today offer a free credit score service, and the three main credit repositories: Equifax, Experian and TransUnion have also created a portal at annualcreditreport.com, where you can view and print your credit report for free.
When reviewing these reports, don’t focus exclusively on the score as it won’t be the very same one the mortgage company receives (but it should be close). What you’re looking for are mistakes because unfortunately, credit reports can often contain errors. Someone else’s bad credit might pop up on your report, or a creditor could mistakenly report a late payment. Don’t be caught off guard when your loan officer calls and tells you something on your credit report is causing problems – be proactive to preserve your credit profile.
Gather Your Financials
When you submit a completed loan application, you’ll also be asked to provide some documentation that will verify certain aspects of your loan. Prepare these in advance so you won’t have to worry about scrambling for paperwork while the clock is ticking on a 30-day closing. Gather your:
- Most recent pay stubs covering the last 30 days
- Two most recent W2 forms from your employer(s)
- Most recent bank statements (all pages) covering the past 60 days
- Homeowners insurance information
- Two most recent annual federal income tax returns
- A year-to-date profit and loss statement as well as business bank statements if self-employed
Note: When using a digital mortgage platform, you’ll still need information contained on these documents – or should review them to eliminate any surprises.
Lookout For New Info
Just before your settlement date and the signing of your loan papers, the lender will make a final pass over your application to be sure the documentation in the file is current. This includes a review of recent pay stubs, retirement account documents, bank statements and other items. At this time, if there is a more recent document available, the lender will ask for it – and it will feel like a bit of an emergency.
To avoid this issue, always provide updated documents to your lender right when you receive them. You should also save a copy of all messages sent – so you can easily resend if needed.
Don’t Make Changes
This is one of the most common requests/gripes from loan officers when accepting a loan application because the consequences can be catastrophic.
Here are the “Don’ts” to follow when your loan is in process:
- Don’t take out another credit account.
- Don’t get a new phone
- Don’t miss a payment on anything
- Don’t ask a credit card company for a credit line increase
- Don’t accept a new credit card offer
- Don’t co-sign on a loan
- Don’t buy or lease a car
- Don’t change jobs
- Don’t deposit cash into your savings or checking account
- Don’t withdraw cash from your savings or checking account
- Don’t change at all from what appears on your mortgage loan application.
Here is the list of “To Do” to follow when your loan is in process:
- Follow the list above
One of the main responsibilities of your loan officer is to ensure you have a clear understanding of the process, especially as it relates to closing costs and your interest rate. When you receive your initial offers or cost estimate, review the prospective charges with your loan officer line item by line item and get a clear picture of not just the charge, but why it’s being ordered.
For example, all transactions require a certified Flood Certificate stating whether or not the property is located in a flood zone. Even if your property is nowhere near water or flooding, you’ll still need this in your file. It’s best to ask questions long before you get to the closing table.
Follow Your Lender’s Lead
If you could to look inside your mortgage company while your loan application is being documented and verified, it would probably look like people were spinning plates.
Mortgage lenders must document every aspect of your application and work with multiple other professionals to complete the documentation process in order to get your loan to the underwriting department, which then approves loan. We touched on this earlier, but it can’t be stressed enough: follow the advice of your loan officer, and work with your loan processor to provide requested information as soon as possible.
Mortgage companies do one thing and one thing only: they process mortgage loans. They know exactly what documentation is required and when, so follow the mortgage company’s lead.
If you follow these simple steps, you will be your loan officer’s favorite borrower but more importantly, your loan approval will be easy and stress-free. It all boils down to communication. Talk, ask questions and work hand-in-hand and with your mortgage company to ensure a smooth and simple transition into home ownership.