Mortgage Approval Pitfalls

Mortgage Approval Pitfalls

Congratulations!  You’re pre-approved for a mortgage and ready to find the home of your dreams.  You have nothing to worry about since you have that pre-approval letter in your hand, right?  Not exactly!  This is a common misconception when it comes to the mortgage approval process.  Let me discuss some pitfalls to avoid that will make your life a lot easier to get to the closing table. 

Don’t finance anything!

A lot of home buyers make the mistake of making large purchases before closing their loan.  This is a huge mistake.  If you purchase a new vehicle, open a credit card, or buy new furniture, (Just to name a few) guess what?  You just increased your debt-to-income ratio (DTI) which could result in your loan being denied.

Don’t let anyone pull your credit report!approved property guiding

Your pre-approval is based on your credit report.  Credit reports are time sensitive and could expire before your loan closes.  If a new credit report is required prior to your loan closing, any new credit inquiries after your pre-approval was issued could result in a lower credit score.  A lower credit score could mean a higher interest rate, higher closing costs or worse, loan denial.  Don’t fall for the temptation of applying for a credit card to save 10% off your department store purchase.  Really, which would you rather have; 10% off at the department store or the new home that you have under contract?

Don’t complicate things with your bank accounts!

You must prove that the down payment money is YOURS and that you didn’t borrow it.  Home buyers consistently make the mistake of moving money around from various accounts before loan closing.  Even worse, some home buyers deposit cash into their bank account without any proof of where the money came from.  Every deposit (usually within 60 days of loan approval) has to be sourced to document where it came from.  Direct deposits from you employer are easy to document.  Transferring money between bank accounts will only make the loan process tougher on you.  If you transfer money between accounts, now you have two or more accounts that you need to source deposits for.  Just keep in mind that you need to be able to document any large deposits that show up on your bank statement(s).

Listen to your Loan Officer and don’t make assumptions!

During the loan approval process, don’t make assumptions on what will or won’t impact the loan decision.  For example, most people assume that closing credit card accounts will improve their credit score.  However, this could have a negative impact on your credit score since you might be closing an account that has a lengthy track record of payments being made on time.  This is just one example.  Make sure you ask questions and listen to your Loan Officer.  They can help make the loan approval process much easier for you.

Not sure who to call or where to start? Contact me today for a 100% free no-obligation loan inquiry analysis.

Matt Pell,  Loan Officer
Mortgage Warehouse, LLC
(239) 672-8502 – Direct Line
(239) 344-9223 – Fax
Company NMLS ID – 137154
Individual NMLS ID – 1018529
Better Business Bureau Rating = A+

Posted on January 6, 2014, in Finance and tagged , , , , , , , , , , , , , , , , , . Bookmark the permalink. 1 Comment.

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