7 Deadly Sins of Mortgage Lending
Posted by: Greg Fischer Post date: December 30th, 2011On paper, mortgage approvals are easy. If you have a good credit history, enough income to pay the mortgage and other bills, a house with the required value and equity for your loan program and all the little details can be verified – you’re approved.
Staying approved can be a whole different matter.
There are a number of things that can make a good mortgage loan approval go bad. Some of them can’t be predicted or prevented – a flood, being laid off of work or legal issues with the property can all be deal-killing surprises.
There are also a number of borrower-created approval catastrophes that can be easily avoided – if you know what not to do. Here are 7 of the most common ways to get your mortgage approval denied:
- Don’t do anything that increases your debt. The new car, financed furniture, or personal loan to “cover your costs” will all affect your debt to income ratio, and will at least delay your closing, if not disqualify you altogether.
- Don’t change your job, pay structure or employer. And DEFINITELY don’t become self-employed until after closing.
- Don’t transfer large sums of money between bank accounts.
- Don’t forget to pay your bills. All of them. At least the minimum, at least on time.
- Don’t apply for new credit cards or other financing. Period.
- Don’t accept a cash gift without filing the proper “gift” paperwork.
- Don’t make random, undocumented deposits into your bank account.
Important things to note:
- Don’t break the rules.
- If you must break the rules, talk to your loan officer before you do.
Sometimes, things happen. If you get a job offer in your field for double the income but you need to start next week, that’s probably OK. But you don’t want that to come up a day prior to closing. If you get a bonus from work and you really need to deposit the check, that’s probably OK too. But you need to be careful to document the source. If you forget to pay a bill on time and that is reflected on your credit report, that’s probably not OK. Don’t do it.
Bottom line: anything that might change your credit profile, or your employment/income, or your verified assets needs to be cleared with your mortgage professional BEFORE it happens. Prevention is less painful than cure.
