Some of the most common questions we receive on a daily basis are: “What can I do to prepare myself to purchase a home in the near future, and what do I need to do to get a great loan? It is also one of our favorite questions to answer. At Rock Mortgage, our trained Residential Mortgage Loan Originators study the loan process and market trends carefully to provide you the best path into your dream home. So, we’ve outlined our best advice to get you started.
Here are the ten most important things that you can do to obtain your best possible mortgage and ensure a smooth loan process.
1) Review your credit card limits and balances.
Make a list of every credit card that both you and your spouse have. Check what is the limit on each card, and if possible, pay down your balances under 19% of that limit. For example, if the limit on your card is $2,000, try to keep your balances under $380, and don’t charge them again until after you close on your home. In this process, you can responsibly manage debt and can help to raise your credit scored by 40 to 60 points. So, when you are ready to purchase a home and lenders pull your credit, you will qualify for better terms on your mortgage loan. ,
2) Do not deposit cash.
It is not a good idea to deposit cash unless we can clearly document the source of that cash (Such as the sale of a vehicle that we can clearly show the exchange of title, etc.). Most lenders cannot use any cash deposits toward your down payment. Only deposit your paychecks since we analyze every single deposit done over the last two months of bank statements to ensure compliance with loan regulations.
3) Do not apply for any credit before and during the loan process.
When you apply for a mortgage, we look closely at your credit report to determine your debt-to-income ratio. So, we can easily tell if you apply for any new credit until the day we actually close on your loan. If you acquire any new debt, it has to be disclosed and will count against your ratios, and your loan could be declined. It happens more often than you may think.
4) Do not change jobs, specially do not become self-employed, do not change bank accounts, residences, etc.before applying for a loan.
If we could describe in one word what we are looking for in a borrower, it is Consistency. The more consistent your life, the easier the loan.
5) Do not co-sign for anyone.
When you cosign a loan, you are equally responsible for that debt, and it has to be included in your ratios. Needless to say, if they are late on their monthly payment, it could significantly lower your credit scores.
6) Do not buy a vehicle before or during the loan process.
Buying a vehicle greatly reduces your home purchasing power. To put things in perspective, a $500 monthly payment could reduce approx. $80,000 on the amount you can borrow to purchase a home. If you have to purchase a car, please do so after you close on your home.
7) Do not buy furniture or appliances before you close on your home.
For the same reason as a car, do not buy furniture or applies before or during the loan process. Many people make this mistake and in some cases, the loan could be declined at the end of the process. Please wait until after you close on your home to make any purchases.
8) Do not spend the money you have for closing and reserves.
Many people start buying articles for the home prematurely and spend the money that was originally disclosed on the application. Your loan is approved with a certain amount of assets at the beginning of the process. That money has to remain in your bank account until the day you lose on your home.
9) Watch your credit report and bills like a hawk.
A single late payment could damage your credit, and your loan could be denied. It does not matter if the monthly payment is only $5.The fact of being late could drop your credit scores significantly. Also, lenders do not want to see insufficient funds. If there is not enough money in a bank account, do not write checks or have direct withdraws. Make sure that there is always enough money on any specific bank account to cover your monthly responsibilities.
10) And finally, always tell your Residential Mortgage Loan Originator (RMLO) the truth and nothing but the truth.
Many people underestimate a Lender’s ability to document and verify the information. Underwriters have access to very sensitive information and they will verify tax returns directly with the IRS, correct Social Security Numbers with the Social Security Administration, Marriage status with the County, Employment history with each current and past employer, and more. In other words, always tell the truth, even when it may be embarrassing. Professional RMLO can guide you through the proper way to handle and clearly document each situation.
We are here to help. Give the Rock Mortgage residential loan experts a call to create a personalized plan to fit your home purchase timeline. Reach us at 832-230-3067.