Even independent mortgage lenders may need to deny your loan because of these common mistakes.
One of the smartest things you can do when you’re looking to buy a new home is to get pre-approved for a mortgage. Both banks and independent mortgage lenders issue pre-approvals. Zachery Adam with GoPrime Mortgage in West Asheville strongly encourages his clients to get pre-approved for a mortgage before you begin house hunting.
Getting Pre-Approved has Several Advantages
- Tells you know exactly how much money the lender will let you borrow, so you can budget and house-hunt accordingly.
- Makes a positive impression on sellers by showing you’re serious about the purchase.
- Gives you an edge when negotiating a price, as the lender has already given you a definitive answer on your loan inquiry.
The Smart Way to Buy a House
Pre-approval differs from pre-qualification. Getting pre-qualified only gives you an estimate of how much you can expect to borrow, and only gives you a dollar range that might be available to you. Getting pre-approved, on the other hand, provides the security and certainty that you have the means to buy the house you want.
Getting pre-approved does take some time, so it is smart to start the process before you even begin to look at homes. You’ll need the same documentation you would to apply for a mortgage loan (all debts, proof of income, assets, paystubs, tax returns and bank statements), but it’s a more intelligent way to go about buying a house — you know what you can afford as you shop.
Preapproval Isn’t a Failsafe
Even if you get pre-approved for a certain amount, you may still not get the loan. Mortgages, even from conscientious independent mortgage lenders, like Zachery, are fragile instruments subject to wilting in the wrong light. Once you are pre-approved, you must tread lightly in all things financial.
It is important to follow the eight pieces of advice below. A small mistake may lead to you stalling your mortgage loan or lead to a denial.
- Don’t Miss Any Payments
Keep up to date on your credit cards, utilities, rent, or current mortgage. You must wait a month or two from the time your offer is accepted to the date of your closing before you can afford any lapses. Anything that can lower your credit score may cause you to lose your pre-approved mortgage. Even a small, missed payment can end up causing you to pay a higher interest rate than you had expected, therefore raising your monthly payments.
- Don’t Make Any Large Purchases Before Closing
Be conservative with your funds until you’ve left the closing table. Don’t buy a new car, a new big-screen TV, or a Hawaiian vacation, or change your current leases. Whether you pay cash or use a credit card, a large purchase during this time may negatively impact your pre-approved mortgage rate.
- Sit Tight on Your Credit Cards
Independent mortgage lenders prefer that in addition to not adding significant debt through a large purchase, you also should follow this financial advice:
- Don’t open any new credit card accounts.
- Don’t close any of your existing credit card accounts.
- Don’t pay off all your credit cards.
- Don’t transfer balances between credit cards.
Banks and independent mortgage lenders rely on credit companies (Equifax, Experian and TransUnion) to calculate your credit score. The credit bureaus use a complex formula that considers your existing debt, the number of credit accounts you hold, and the length of your credit history. Don’t make any changes to help ensure you make a seamless transition from pre-approval to approval.
- Manage Your Finances
Don’t move money around between financial institutions, and don’t deposit odd sums into your accounts that you can’t provide documentation for. This includes gifts — if you receive a cash gift, complete the necessary documentation. Also, don’t cosign for any other loan during this time, even if it’s for your best friend, your employee, or a member of your family.
- Maintain the Same Job
Most lenders require stable employment of around two years before you apply for a mortgage. That means you need to have held a consistent job in the same field or industry for two years. So, between the time you’re pre-approved and your mortgage officially closes don’t make a career change. Even moving to a new company for a better job can hurt your chances of closing on your loan.
- Minimize Your Financial Risks.
If you are thinking of starting a new business, it’s smart to wait until after you’ve closed on your house. If you’re thinking of cashing out your IRA or buying a bunch of new stocks, wait. If you do anything that involves financial risk, it will come back to your lender and could jeopardize your mortgage.
- Be upfront if you’re involved in a lawsuit. While this advice doesn’t apply to everyone, the point is: don’t keep legal or financial secrets from your lender. Even independent mortgage lenders want to know this. Foreclosures and bankruptcies are particularly harmful to your chances of closing on a new mortgage, but if you’re forthright, a reputable lender like Zack will work with you.
- Provide All Requested Documentation in a Timely Manner
The best escrow is a closed escrow. If you’re in that period, cooperate with your lender and real estate agent. Banks and independent mortgage lenders rely on you to provide whatever documentation requested in a timely manner. Sometimes additional documents are needed, and your assistance can speed the process along. While you should protect your rights when buying a house, work with your lender and your real estate agent when they ask you for your help.
Try Independent Mortgage Lenders
To get more information about how to protect your pre-approved mortgage loan, contact Zachery or call him at 828-242-4780. GoPrime Mortgage is one of those independent mortgage lenders who specialize only in mortgage products. Working with a local lender will open up a wide range of mortgages, so they can find the mortgage the fits your circumstances.