Financing a home purchase or refinancing an existing mortgage is a process. Although the digital age has allowed this process to become more streamlined and efficient, there are still multiple steps involved in securing a home loan.
To help the process move as quickly and smoothly as possible, borrowers should do the following before they begin applying for a mortgage.
Avoid Job Changes
Mortgage lenders look for patterns of consistency in your employment record. In most cases, the longer you’ve been at your current job, the better. Quitting your job or changing careers just before the loan application process can hurt your chances of getting approved. Likewise, changing your employment status once the process has already begun can cause several headaches in the form of delays and possibly even being denied for a loan.
Check Your Credit
Be aware of your credit score and familiarize yourself with your credit report well in advance. This is especially important for borrowers who are applying for a mortgage that has a higher FICO requirement (typically these are jumbo loans, non-QM loans, investment property loans, or loans for second homes.)
If you check your credit early enough, you can address any errors or dispute fraudulent charges before your report is presented to potential lenders. And don’t worry; you’re allowed to access a free credit report from each of the three major credit bureaus (Experian, TransUnion, and Equifax) once a year.
Some services offer a streamlined reporting service from all three bureaus through one website/company, but be careful–these services often require a fee. Some of these include CheckMyScore.com, IdentityGuard.com, and, ironically, FreeScoreOnline.com, which offers a 7-day free trial, but then automatically charges consumers $29.95/month if they don’t cancel their membership.
Avoid Major Purchases
Lenders look at your debt-to-income (DTI) ratio very carefully when considering your mortgage application. When you make a significant purchase on credit, it impacts your DTI ratio as well as your credit score. Although making a big purchase right before applying for a home loan isn’t necessarily a deal breaker, it can bump you out of your lender’s acceptable DTI and/or FICO score range.
Get Your Paperwork Together
Unless you’re getting a low-doc or no-doc loan, you’re most likely going to have to provide some documents to your lender. These documents may include a photo ID, bank statements, tax forms, pay stubs, gift letters, written proof of assets, and more. It will help the loan process go a lot smoother if you make sure your documents have the correct information and are organized, copied, and ready to present to your lender.
Make Sure the Property is in Working Order (For Refinancing)
If you’re refinancing a mortgage, the lender for the new loan may not approve your application if the property is damaged or in the middle of repairs or a remodeling project. In these cases, an appraisal may be required, and the appraisal can’t be performed until the repairs or remodeling is complete.
Bonus – Be Responsive to Your Loan Professional
Just as you expect your loan officer or mortgage professional to respond in a timely manner to your communications, make sure you are doing the same for them. The more effectively and efficiently both parties communicate, the smoother the loan process will go, and the faster you can get to the closing table.
Ready to start the loan process? The first step is to reach out to a loan professional serving your area to get preapproved. Connect with Luxury Mortgage below to begin your home financing journey.
Call us today: (888) 379-0303
Four Landmark Sq. Suite 300
Stamford, CT 06901