He’s making a list. Checking it twice. Gonna find out who’s naughty or nice. An underwriter is coming to town! Winter is usually when most housing markets in the states cool down with the weather. But if you’re considering purchasing a home in the upcoming year, this is the time you should be making preparations! Taking some steps now can put you ahead of the pack and make the home buying experience easier on yourself later. So, will you end up on the naughty or nice list this homebuying season? And how do you end up on the nice list and avoid the naughty list?
Want to end up on the Nice List? Here’s how!
Some realtors won’t even show you a house if you are not pre-approved. It’s smart to know how much you can afford and what loan programs you qualify for to help refine your house search. Would you buy a dress for someone if you didn’t know their size? We can pre-approve you here at Keystone Alliance Mortgage and you can start by scheduling an appointment here: SCHEDULE YOUR FREE MORTGAGE CONSULTATION.
Good Buyers have an open trade line whether that be a credit card, car loan, or student loan. Lenders want to see you are capable of borrowing money and paying back responsibly. Keep credit card balances low, make payments on time, and know what is reporting on your credit! You can get a free copy of your credit report by going to annualcreditreport.com.
Lenders want to see a pattern of the money you earn. Salaried income or consistent working hours give a lender more confidence you can repay a loan over time. Know when you started and what your gross pay is (how much you make before taxes). Multiple jobs, tips, bonuses, commissions can be used if you have a two-year history to document.
Most loan programs require a down payment, and all loan programs have closing costs. Know how much you need and start saving if you haven’t already! Lenders want to see verified funds that are in a secure institution like a bank or investment. You can also borrow from a retirement account but check with your financial advisor or HR representative for details.
You can earn goodwill and make life easier on your lender/realtor by having documents available if needed. Paystubs, W2s, Taxes, Bank Statements with all pages. Photocopies of IDs. If you have an iPhone you can use the notes app to take a picture of a document and convert it into a clear PDF scan.
This often-overlooked detail can save you many headaches and help you close on your home purchase on time. If the application asks for it, your loan officer needs to know. This includes but is not limited to other properties owned if you have children, child support (owed or received), gaps in employment, or debts owed. If you got disqualified from purchasing before, share that reason with your loan officer so they are aware.
Be a Team Player
Be patient! Be polite. Ask questions about anything you don’t understand. Provide documents or assistance to your loan officer when asked. Ultimately we are here to assist you with the purchase. Buying a home can be stressful for the buyer as well as the loan officer. Often the loan officer will do a lot of behind-the-scenes work to make things as easy for you as they can. Let them know you appreciate all their hard work! Leave them a google review if a team member made a difference! For our team, you can leave reviews for our Erie, Harrisburg, San Juan, or State College offices.
Now for the naughty list! These items will get you coal in your stocking and at worst keep you from being able to buy a house this homebuying season.
Not getting pre-approved first may delay the closing of your purchase while you complete the application and get your documents together. You may also find out that you can’t in fact buy the house you just put in an offer because you don’t qualify for lending.
Late payments within the past year on your current mortgage automatically disqualify you from getting the best financing with a traditional mortgage loan. Having a bankruptcy within the past 7 years can also affect which loan programs you qualify for. If you owe taxes on a property, that will need to be satisfied before you can purchase another property. Items you disputed, collections, charge-offs are blemishes that can be problems depending on the amounts and type of accounts.
Opening New Debt
Taking out a loan, purchasing a new car after you’ve been pre-approved will affect your mortgage pre-approval. You now have a new debt and your credit score will go down because you just opened another loan. If you need to open a new debt, speak with your loan officer first before doing anything else.
If you work hourly but are 32 hours one week, and 12 the next, the lender is going to examine how much you can be reasonably expected to get. This can require your employer to complete a form documenting your hours and what they expect to provide for you in the future. Self-employed borrowers have to provide their taxes and show increasing income or use the most recent year if declining. Writing off your income to avoid paying taxes also lowers the income a lender can give you credit for.
Being unemployed doesn’t disqualify you from purchasing a home, but understand that in most cases you cannot use unemployment as income. If you were unemployed for 6 months or more you must be back on a job for 6 months to apply with most loan programs. You can use social security or disability.
No Verified Assets
Keeping cash at home is a big no-no! The Patriot Act requires lenders to verify funds used for a mortgage. Funds kept with a financial institution like a bank is good. Cash kept under a mattress at home is bad. A lender can’t verify where the cash came from and will not allow the cash to be counted towards having the funds needed to purchase a home. Banks offer federal insurance to protect your funds in case of theft or loss. But cash kept at home has no protection. Get your cash in the bank and keep it there. You may even earn some interest (the bank will pay you!) to keep your funds there.
Not keeping pay stubs, W2s, bank statements, or taxes will cause delays in getting pre-approved and also closing on the purchase of your home. Don’t just shred these documents or even worse throw them in the trash. Keep them somewhere secure.
Engaging in Mortgage Fraud
Lying on your application, falsifying documents, etc can lead to prosecution and jail time for convicted offenders. Under U.S. federal and state laws, mortgage fraud can result in up to 30 years in federal prison and up to $1 Million in fines.
This list isn’t exhaustive but it covers a lot of what we see routinely that can put you on the nice or naughty list.
You better watch out for the homebuying season.
You better not cry.
You better not pout.
I’m telling you why?
An underwriter is coming to town!