The mortgage process can be a lengthy one. Often there are several months between initial pre-approval and finding a home to purchase. Even after a property is found and a contract ratified for the purchase of the property, there can be several weeks until settlement. With refinance transactions, there can be several weeks, or even months, between the initial application and final loan settlement. During that time, it is important to remember that borrowers cannot engage in any activity that may interfere with the final loan process. Below are some guidelines that will help prevent any unnecessary delays in the processing of your new mortgage loan. Borrowers do not want to do any of the following:
- Move cash around. Lenders will need to verify all of your income and assets going into your bank accounts. Moving assets around can create a verification nightmare for your lender. The best advice is to leave everything where it is starting now and discuss any changes with your loan officer. All transfers of assets must be properly documented in a manner acceptable to your lender.
- Make large deposits. Lenders will be reviewing any large deposits into your bank accounts. Be prepared to document all non-payroll deposits, regardless of the amount.
- Change your job or profession. Lenders qualify borrowers based on employment information provided at the time of application. Changes in employment or profession may affect your qualification, so please discuss with your loan officer prior to making any changes to employment or profession, or if your income or hours will be reduced in any way.
- Pay bills late or miss any payments. Not paying your bills or paying any bills late may lead to lower credit scores and disqualification for a new loan.
- Make large purchases or open any new credit. It is a good idea to avoid any new sources of credit (new credit cards, new car loans, etc.) as it will materially change your credit report and debt-to-income ratios. Also, if you are planning to pay off major credit card debt prior to closing, hold off until you have discussed it with your loan officer. Although lenders pull your credit at the time of application, federal regulations also require that the lender pull your credit again right before closing to ensure no new lines of credit were opened and to ensure you still qualify based on your scores and debt load.
- Throw away any documents. Hoard your paperwork. Keep all bank statements, pay stubs, tax returns, w-2s, 1099s, and any other financial documents and papers from the past two years in a convenient location.
- Document monetary gifts. Gifts from relatives are common when purchasing a home. If you are receiving a gift, please notify your loan officer as there are necessary steps to follow.