By Vickie Perry
Often I am asked if there are steps a borrower can take to make their loan process a bit smoother. As my article last month indicated, paperwork and documentation are key factors, but there are other steps one can take to ensure a smoother process. Below are a few suggestions to assist in a more pleasurable home buying process.
Choose a Licensed, Local Lender: Applying and being approved for a mortgage is a HUGE financial step for most borrowers. Don’t leave such an important financial decision up to an internet lender that you do not know. If a lender says their loan program is “no-cost” or promise unbelievable rates. The time-proven phase of “if it sounds too good to be true, it probably is” definitely rings true. Be sure you are working with a licensed lender who is familiar with Alaska properties, especially properties in Southeast Alaska. Be sure to ask for referrals from friends, family as well as your realtor. Real Estate Agents are excellent resources for assistance with choosing a lender because they work with a variety of lenders on a daily basis.
Disclose Up Front: The law requires your lender to fully disclose various aspects of your loan, as a borrower you need to do the same. Be sure to tell your lender if you owe or receive child support, if your down payment will be a gift from family, if you are self employed or partner in a business, and the list goes on. A lender has no way of knowing your entire situation and unexpected changes in income, debt, source of down payment, ect. may cause delays, or even loan denial.
Understand Your Numbers: A reputable lender will give you a Cost Estimate. This estimate will reflect all fees associated with your loan, as well as breaks down the down payment required, the loan term, the preliminary interest rate, and the monthly payment including taxes and insurances. It is important a borrower understands each component of the estimate so there are no surprises when it comes time to close. If a lender provides an estimate for a home prices at $250,000, but the price ends up being $275,000, expect the figures to increase.
Prepare Your Paperwork: The basic paperwork required for a mortgage is the same for most borrowers however each borrower’s financial situation is different. To get started, a borrower will need to provide: 30 days worth of paystubs, 2 months bank statements, and 2 years of tax returns including W-2s/1099s, business and personal. There are loan programs that require additional paperwork, and other that require less. Example: If you are receiving and/or paying child support, a divorce decree and/or child support order will be required to document the amount.
Keep Your Money in Place: The bank statements provided to your lender will be scrutinized for erroneous deposits. Any deposit that does not correspond with your standard paycheck will have to be sourced and documented. Transfers from one bank account to another require documentation. If you cash out a retirement account to assist with your purchase, you will need to provide a statement showing the funds available, as well as the statement showing withdraw of retirement funds. Before you transfer, deposit, or withdraw, consult your lender.
Keep Your Debt Load to a Minimum: Borrowers are required to disclose if they have applied for additional credit. This might include a credit card, auto or boat purchase, essentially anything that incurs a debt. To be direct, don’t do it. A lender retains the right to re-pull your credit during the approval process and any newly opened accounts for have to be documented. The new accounts could potentially reduce a borrower’s credit score, as well as change the debt loan. Either change could have a negative impact on final approval.
Don’t Switch Employment: A lender pre-qualifies a borrower based on their current employment status. Future employment doesn’t weigh into the qualifying equation. A borrower’s employer will be requested to complete a Verification of Employment. If the VOE indicates temporary employment or that employment is coming to an end, the loan will be pended for further explanation. Additionally, the employer will be contacted within 10 days of closing to verify the borrower is still employed.
If you enter the process as an open book prepared to document, explain, ask questions, and be asked questions, you will be ahead of the game. My biggest piece of advice is to contact your lender before you make any financial decision while you are amidst the mortgage process. Believe me when I say, your lender wants your loan to go just a smoothly as you do.
Vickie Perry (#AK195996 / #AK167729) is Branch Manager of Residential Mortgage, LLC, in Juneau. She can be reached at (907) 789-2329. Visit her website at www.vickieperry.com.