I encourage anyone who is considering buying a home to start the preapproval process as soon as possible. Regardless of if you’re not planning on buying for a year or you think your credit, income and assets are prefect – you never know what underwriters may find lurking in your application.
I thought I would share some common phenomena that borrowers are often shocked by when starting the loan application process.
Haunted Credit History. Many want to delay running a credit report until just before they’re ready to start the application process when they should probably go ahead and allow a mortgage professional to pull and review their credit (this should be done at no cost, in my opinion).
I’ve had instances where credit scores are just a few digits from receiving better pricing for a loan or where the borrower had no idea an creditor had reported them late. There are often actions that can be done to help remedy these situations and improve credit scores.
Zombie Debts. Have you co-signed for your child’s student loans or your best buddy’s car loan? This will most likely be reported on your credit and if they’re not making payments on time, your credit scores will reflect that dreadful credit too.
Mysterious Large Deposits. Lenders will require to see all pages of the bank (or other asset) statements documenting where the funds for closing are coming from. If there are large deposits, or a large sum of deposits, that are not easily identified (such as your payroll), be prepared to document where the funds came from. Lenders will want more than a written explanation, you’ll most likely need to show copies of the check or check stubs.
Vanishing income. Depending on your type of income, if your income is declining, most lenders will use the current lower income instead of an average over the last 2 years. Bonus or overtime income is typically averaged over the last two years and be from the same employer. If you’re income is on the rise and it’s not salaried income, be prepared for the lender to average it over the last two years. It’s critical to provide your mortgage professional with your income documentation so they can determine what income the lender may use.
The mortgage process doesn’t have to be horrifying! The earlier you start the process, the more time you’ll have to deal with any potential hidden issues.
If you are interested in buying or refinancing a home located anywhere in Washington state, I’m happy to help you! Click here if you would like me to provide you with a free mortgage rate quote based on your financial scenario.
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