Mortgage Do’s and Don’ts

When thinking about buying a new property, there are simple guidelines to help make the process of applying for a mortgage that much easier. Here are a few tips:

DO:

  • Keep all records in good order. You’ll need access to a number of financial documents and records. Keep them easily accessible and organized in case updates are needed on short order.
  • Track your income. Underwriters will usually verify your income and tax documents through your employer, CPA and IRS tax records. Hang on to new pay stubs as you receive them.
  • Organize your asset records. You’ll need to continue colleting savings, check and investment account statements. Keep al numbered pages of every statement.
  • Document any gifts of cash. If any of your down payment or closing costs will be funded by gift money from an eligible donor, the donor will need to sign a gift letter (can be provided by LMCU or your lender) and an account statement showing where the funds came from.
  • Maintain your current rent or mortgage obligations. If you’re a renter, keep paying your rent on time and be sure to retain proof of payment. If you’re selling your present home, be prepared to produce your Closing Disclosure.
  • Preserve your credit rating. Your credit report may need to be revisited more than once. Be sure to keep making all your payments on time and in full. Negative changes to your score could cause a loss of approval and could affect your rate and/or pricing.
  • Know that lending requirements have changed. Mortgages require more documentation these days. Requests from underwriters may often seem redundant or unneeded, but just know that there’s a purpose and a reason for all requested materials.

DON’T:

  • Apply for a new credit card or financing. Changes in credit can impact the processing of your loan. It could change the terms of your mortgage or even prevent closing outright. If you must open a new account or borrow against investment or retirement funds, make sure to call LMCU or your lender first.
  • Job hop. Changes in employment, periods of probation, career resets and even bonus structure can throw a wrench into things. You want a period of employment calm during the processing stage.
  • Make undocumented transactions. Money coming into and out of your possession can complicate matters. Even small deposits must be sourced unless they are identified. Make copies of all checks and deposit slips and keep them organized and readily available. Keep your deposits separate and small and avoid cash deposits.
  • Hold off cashing out investment funds or retirement accounts. If you must, do it early in the underwriting process and document all transactions. There is always a possibility that the market could decline unexpectedly, leaving you short of funds for closing.
  • Be shy about asking questions. Mortgages are complex transactions. It’s easy to get confused when so many moving parts are in play. Big or small, take all questions and concerns to your loan officer, sooner rather than later.

Many thanks to Dave Stellin, Mortgage Loan Originator with Lake Michigan Credit Union for all of this important information! You can reach him at Dave.Stellin@lmcu.org or (616) 218-3653.

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