These days, anyone can get approved for a mortgage -- all you have to do is prove you don’t need one.
Today’s mortgage market is different from the one of last decade. It can be tougher to get mortgage-approved as compared to 5 years ago, and it can be harder to keep that home loan approval intact.
There’s a right and wrong way to approach the mortgage application process.
First, Get Your Mortgage Application Approved
Mortgage approvals are basic — meet the rules of your lender, and your loan will be granted.
Mortgage rules, which are more formally known as “mortgage guidelines”, tend to boil down to three simple categories — (1) Cash, (2) Credit, and (3) Income. Mortgage lenders employ people known as “underwriters” whose job is to verify that your loan request meets said rules.
Cash refers to the down payment or equity position in your home.
When you’re buying a home, underwriter scrutinize the downpayment and its origin. You can’t just plop some of that money you’ve been hiding in your mattress at the closing table. Cash must be sourced and explained.
When refinancing, a home appraisal helps determine your equity. The appraisal is held under a magnifying glass, too, because it’s linked to your loan risk and .
Credit describes your actual credit scores, plus a few other factors, too. These factors include the history of how payments have been made, the age of the accounts, the balance to limit ratios, the age of any delinquencies, the type of delinquencies, and more.
In general, higher credit scores are better.
Lastly, income refers to a mortgage applicant’s annual earnings, plus other qualifying criteria.
Details such as how a person is paid and how long they’ve been getting paid that way matters; as does how long they’ve been on their current job and in their current line of work.
A mortgage applicant who is strong in all three areas — cash, credit and income — is likely to get mortgage-approved. A person who is weak in one or more areas is less likely to be approved.
10 Tips To Keep Your Mortgage Approval Intact
Getting a mortgage approval can be tough. Once your have one, then, you want to make sure you keep it.
There is no “complete list” of Dos and Don’ts for mortgage applicants, but there are 10 no-nos which stand out (and which continue to ensnare mortgage applicants nationwide).
Keep this list handy. It will help ensure that your mortgage application process goes faster, more smoothly, and with a lot less stress.
- Do NOT quit your job or change jobs. Employment stability is a major factor in the underwriting process. Quitting or changing jobs, or even positions within the same company can greatly endanger your loan approval. If you are likely to quit or change jobs during your application process — even for a promotion — consult your loan officer immediately.
- Do NOT make any large purchases immediately before, or during, the loan approval process, either with cash or credit. In addition to cutting into the money available for your down payment, you may add to your monthly expenses and underwriters don’t want to see an increase in your debt-to-income ratios.
- Do NOT have your credit pulled. Too many inquiries during a certain time period can negatively impact your credit score. Additionally, you’ll create extra work for yourself. Most underwriters will ask for a letter of explanation about the inquiries made.
- Do NOT obtain and/or deposit unusually large sums of money without notifying your loan officer. Remember “cash” is looked at very closely by an underwriter. Unusual deposits outside of normal payroll deposits are often required to be documented and sourced.
- Do NOT open, close or transfer any asset accounts without first consulting your loan officer. Similar to your employment history, it’s better when your banking history shows stability.
- Do NOT open, abnormally increase nor abnormally decrease your credit balances. Although it may seem ridiculous, paying off an account can actually do more harm than good.
- Do NOT stop making payments on anything. For various reasons, some people “skip” their mortgage payment while in the process of refinancing; or otherwise choose to dispute a bill. Be very careful about intentionally withholding payments to creditors. Continuing to pay every obligation is critical.
- Do NOT start that long overdue home improvement project you’ve been thinking about for a few years. This is especially important when the home improvement project requires you to take out a loan.
- Do NOT co-sign on a loan for anyone. Even if you’re not supposed to be responsible for monthly payments, co-signing on a loan can increase debt-to-income ratio and reverse a mortgage approval.
- Do NOT fudge any of the facts on your application. Underwriters live in a world that’s black or white. They don’t take application errors lightly, even the unintentional ones.
In addition, here are some bonus tips :
- Do NOT finance cosmetic or elective medical procedures. Delay such work until after your closing.
- Do NOT solicit mortgage advice from people who aren’t actual loan officers. Your friend who had her real estate license in 2001 is not a mortgage market expert.
- Do NOT start a loan just before leaving the country unless you will be reachable by phone and email.
- Do NOT become obsessive about how the credit card balances on your mortgage application fail to line up exactly with the actual, living balances on those accounts.
These fourteen tips — 10 tips + 4 bonus — will help you keep your mortgage loan on-track. It’s good to be prepared.
Get Today’s Live Mortgage Rates
Getting approved for a mortgage is often simpler than people expect — millions of loans are approved each year, after all. However, with your loan approval underway, be sure to avoid behaviors which can put your approval in peril.
Loan officers make a career on loans which get to the closing table, and they have the experience to help you get there, too. Get started by comparing today’s live mortgage rates here. Rates are available at no cost, with no obligation, and with no social security number required to get started.