Be careful about what you say to a mortgage lender because what you say may end up getting your loan application denied.
A mortgage loan application process involves a full examination of your financial background. There will be a lot of questions and mountains of documents to complete. By the end of it, you might have more questions than there were on the document. It’s important to be honest to your lender, but don’t say anything that can screw the deal up. Your goal is to get approval, and getting the best rate available.
Here are a list of 10 things you should not say to your lender
1) Anything Untruthful
Lying to a mortgage lender can ruin your chances at approval. On top of that, providing misleading info on a loan application is a felony. Welcome to mortgage fraud! You can try to hide certain info, but lenders are required to perform verifications of key financial documents. If you’re having some trouble, let your lender know and they’ll help you get over those obstacles.
2) What's the most I can borrow?
“So, how much can I borrow?” Please don’t ask this question. That shows most lenders that you haven’t done your homework and you sound uninformed. The hope is that you are someone who understands the impact of this large loan, but with questions like that you might not.
3) I forgot to pay that bill again
Insert cringe here. Like most things in life, consistency is the key. If you mention that a few bills slip your mind here and there, it may create some concern. Even if you don’t say anything, those bills will show up on your credit report. This is a fast-track to getting your loan denied.
4) Check out my new credit cards!
We get it, you want to buy things for your new home. The bad part is you’re adding extra debt to do it. Telling your lender you’ve opened up or applied for several new credit cards may not go over so well. Wait until after you finish buying the home to make those big purchases. You don’t want to come off reckless with your spending before getting approval.
5) Which credit card ISN'T maxed out?
Your lender doesn’t want to see significant increases in the majority of your credit balances. Be mindful of your DTI (debt-to-income ratio). Small charges are fine, but it’s not unusual for a lender to run a final credit report days or hours before closing. That second look can change the terms of your loan or deny your application.
6) Changing jobs annually is my specialty
Some of this you can’t control, but if you can it’s best to show stable employment. At least two years is a common requirement for mortgage lending approval. Lenders are counting on you to reserve part of your income for loan payments. Showing frequent job changes might not get you loan approval as your lender may have some concerns about your ability to pay back the loan.
7) This salary job isn't for me, I'm going to commission-based
Kudos for you taking the gamble on yourself, but a lender may not. Current employment status is crucial to the loan approval process. It takes time, so your lender may not freak out if you get a promotion. If you tell them you’re thinking about leaving your salaried job, the deal might be off.
8) I'm getting a cash gift from my parents for the downpayment
That’s great! Keep in mind many lenders allow the use of cash gifts for certain qualifying loan programs. Specific rules do exist, so before mom and dad write you a check, speak with your lender. Your loan application may get rejected because of a simple rule that was overlooked.
9) So foreclosure, how's that work?
That’s a major red flag. Asking your lender what happens during the foreclosure process may be a clear indicator that they should think twice. Though it may seem like a harmless curiosity, this may tell the lender that you may have issues paying the monthly loan amount. During the beginning of the process, keep that question to yourself.
10) What is a credit score?
Add this to your financial routine: monitor your credit score. If you don’t know what a credit score is, chances are you’re not ready for a loan. Knowing your score and how it became that are important to know. This will help you make changes before you apply, increasing your chances of approval and a great rate.