Whether you’re a first-time home buyer, or a seasoned real estate mogul, refresh your loan savvy with these dos and don’ts.
DO – Update your information with the lender.
Alert your mortgage broker and lender to any change of address, job, salary, marital status, etc. As part of the closing documents, you will be required to sign a statement that you have not falsified any information about yourself. Falsifying any information can get you in serious trouble.
DO – Save bank documents.
Hold onto documents from your bank, in particular those detailing large or small sums of money, especially deposits…for a minimum of two months. Your mortgage lender will want you to verify all bank transactions. If you only bank on-line, you might need to order statements. Screen shots of your accounts are sometimes not acceptable.
DO – Purchase homeowner’s insurance.
Make sure you coverage is equal to the loan amount or the replacement value. Your mortgage lender will have very specific requirements on insurance, and they will help you communicate those with your insurance agent.
DO – Order a termite and a general home inspection.
A good home inspection will uncover defects in the property as well as possibly becomes a further negotiating tool with the seller. And a termite inspection is especially important in Florida. At the very least, both of these inspections will put your mind at ease as a buyer. Once you’ve signed the closing papers, the home and all it’s flaws becomes yours.
DO – Safeguard your credit scores.
Keep careful notes of any changes in your scores, and pay all your bills on time! One late payment could prevent you from getting a mortgage, especially a late payment on any current mortgages you might have. Also, avoid requesting credit scores on-line through websites like FreeCreditReport.com or any other credit agency. Your mortgage lender will ask you to explain why you had your credit score pulled.
DO – File your taxes with the IRS.
The lender will ask to see one or two years of tax returns, maybe more if you’re self-employed. If you’ve been filing extensions, it will slow down the loan process.
DO – Ask questions, voice concerns with your loan officer.
Your loan officer is there to help! He or she will ask for a lot of documentation from you. The process can be confusing and overwhelming at times, and asking the expert helps you understand the “whys” of all the requests.
DO – Save as much cash as possible before closing.
Sometimes the home purchase process hits some bumps in the road. Having more cash puts you in a stronger position to close on the home.
DON’T – Spend a chunk of change.
During the mortgage application your debt-to-income ratio is monitored very closely. Any large purchases can affect this ratio, especially large credit purchases. As tempting as it is to plan for new home decor, leave the furniture purchases until after the home closes.
DON’T – Consolidate credit or open new credit cards.
Again, any changes in your debt-to-income ratio can impact your loan application. No new cars or furniture on credit!
DON’T – Pay off collections.
Strange as it sounds, your credit score may drop if you do this. Sometimes a lender may require that collections be paid off. Better to consult with your mortgage professional about how to go about this.
DON’T – Get a new job or quit your job.
Lenders like to see at least a two year work history in a similar profession. They will ask for explanations as to why a borrower took a break from work for six months. And as crazy at it seems, we have had buyers who quit their jobs right before closing. A lender will often call your employer the day of closing to do one final verification that you still have a job.
DON’T – Cosign for another borrower.
Cosigning could show up on your credit score and alter your debt-to-income ratio.
DON’T – Switch up your assets.
Changing investments, opening or closing accounts, and making large deposits are all scrutinized by the lender. Moving money from account to account is a no-no as well. Better to not move funds around or make large cash deposits for two months prior to beginning your loan process.
Following these dos and don’ts while obtaining a loan will make for an easy and hopefully surprise-free process. The end result is your new home and a major credit boost!