Here are a list of things you DON’T want to do once you’ve decided that getting a new mortgage is something you need to do:
1. Don’t go out and buy a new car:
Within the few months before applying for a mortgage, or during the mortgage process, avoid the urge to go out and make any large purchases such as a car, furniture or appliances.
Any other loan you take out prior to or during the mortgage process can directly affect your debt to income ratios (DTI), thus affecting your chances of getting an approval for the new home mortgage you seek.
Suffice it to say, that for the typical borrower, the more expensive the car (or item) you buy, the less expensive the home you can qualify for.
2. Don’t make a job change shortly before or during the mortgage process.
Stability in job and income are considered an important factor to lenders. Changing from one job to another is interpreted as instability and can affect your chances of getting an approval.
In some cases however, changing from one job to another (as long as it is in the same field of work), such as a nurse changing from one hospital to another, is not likely to affect your chances of approval.
3. Don’t allow every loan broker you speak with to pull a credit report on you.
Every time someone pulls your credit, it shows on your report as an “inquiry”. An inquiry with no loan or credit issued COULD be interpreted as your being turned down for credit, even when you haven’t.
A better idea (if you plan to speak with several lenders/brokers before choosing one to work with) would be to order a copy of your credit report YOUSELF. You can then fax it or take it with you to any broker you may be speaking with about a loan. Another advantage is that the broker you speak with may be able to tell you what factors on your report are working against you and how you might best be able to improve or remove them.
4. Don’t exaggerate financial status on loan application.
To do so is a federal offense, and although a lender will rarely prosecute, they do have that right. And just as important, if they discover after approval, that you’ve intentionally fudged your numbers and the loan has been made, they can call your loan due and payable immediately. Remember, your lender will check all public records and your credit report.
5. Don’t pack away your important documents until the loan is closed and the deal is DONE.
And by that I mean, don’t put away important financial documents where you can’t get to them (like in a moving truck). The time between loan “approval” and actual settlement is a critical time for both you and your lender.
Many a time it has happened when a particular document, like a bank statement, a pay stub or a payoff statement is needed, only to find out that the borrower has already packed up all this important information and put it on a moving truck that’s headed out of state.
Keep all your important financial documents in a box, brief case, or somewhere else where you’ll have easy access to them when or if needed.
6. Don’t confuse “pre-qualified” with “pre-approved”, and don’t assume a “pre-approval” is an actual “loan commitment”.
This is an issue where there is often a great deal of confusion, even for a mortgage broker. Part of the reason for this is that one lender may have a different “definition” for these expressions than another lenders.
For the most part however, the majority of people I speak with see it this way: When a broker or lender tells you that you’re “pre-qualified”, they are making an educated guess as to how much you can borrow based on the information you’ve provided thus far.
When they tell you that you’re “pre-approved”, they are telling you that the lender has verified everything you have told them and they are willing to loan you up to a specific amount at certain interest rates, and under certain conditions. In either case, an actual loan commitment is still subject to a satisfactory appraisal, title check and other specified verifications referred to as “conditions”. Just be sure to ask your lender/broker specifically what each term means in your particular situation, and what steps you need to follow to obtain the loan.
7. Don’t assume “one size fits all” when it comes to mortgage loans.
When the phone rings at your typical lenders office, there’s usually one loan in particular that most people are asking about … the 30 year fixed rate mortgage. But being that most people intend to move or trade up within just a couple of years, there may well be a better choice.
An adjustable rate mortgage may be better for you, or maybe even an interest only loan. Investigate all your options before making a final decision. Ask your broker or lender to help determine what type of loan may be best for your specific needs.
Michael Hart is a former real estate agent, a private real estate investor, and a Senior Loan Advisor with Anderson Lending Group in Peachtree City, Ga., just outside Atlanta. For more information he can reached at 678-318-3542 or http://internetloancenter.com. He is the author of "Top 10 Tips To Sell Your Home By Owner", a private real estate investor, and a former real estate agent.
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