Gone are the days when you can just call up any loan officer in your area, tell them how much you make and get a mortgage started and approved in a timely, relatively painless manner. These days, getting a mortgage can quickly become a part time job, as you scramble to get documentation for just about anything about your financial health. I know there are plenty of other items you’d rather be thinking about during the escrow period, so here are eight tips to help you make the loan process go a bit smoother.
1. Have Proof of Assets Ready
The little or no down payment purchases are on the way out the door (if not already). If you want to purchase a home, you need proof that you have your down payment, meaning that it’s sitting in a bank account when you apply for a loan—and you have the bank statement to show for it. Depending on the lender, they will ask for 2 or 3 months’ worth of bank statements, so either have the money already in the account, or if it’s been transferred from another place, have statements from the original source ready, too. Don’t want to show the other account’s statement? Then it’s best to move the money into a bank more than 3 months in advance.
Notice also that I said bank account, and not any other type of account. If you still have your down payment in an investment account, for example, banks may discount that value of your assets because the value of equity holdings are volatile.
2. Be Nice to Your Loan Officer
Though you are actually the customer in this case, the roles might well be switched. Your loan officer will prepare and package all your documents for the lender’s approval, so the better job he/she does, the easier it is for you to get a loan. Also, a fair amount of subjectivity goes into each approval, and since you can’t speak with the approval officer anymore these days, your loan officer is practically the only person who you can talk to that will help push your loan through.
So be nice, don’t get emotional and work with your loan officer.
3. Give Yourself Ample Time
Even the best case scenario will require about 45 days to get an approval, so give yourself ample time when you write the offer letter on the house of your dreams by not short siding yourself with an extremely short escrow period. You should also get a pre-approval letter from a lender when you submit the offer, which not only helps make your offer on the house a stronger contender, but also gets the loan process started. At the very least, it puts your file on top of your loan officer’s mind.
[Resource: Top Ten Debt Collection Rights for Consumers]
4. Ask a Lot of Questions, but Only for Information You Can’t Find Online
This goes with the point about being nice to the loan officer. The last thing you’d want to do is ask too many questions and annoy the loan officer, which may hurt the chances of you getting a loan. If you can find the information yourself, do so. Another person who could help with questions is your real estate agent. Though everyone is here to serve you—since you are the person buying a house—the reality is that potential future referrals and repeat business is much more important to your real estate agent than to your loan officer. Therefore, your real estate agent will likely be much more friendlier with your Q&A sessions!
5. Get Income
This sounds obvious right? But I have seen cases where people have money in the bank to buy the whole house outright, so they believe that they should qualify for a mortgage even though they don’t have a job. Unfortunately, lenders treat this as a cash flow loan, so most people who don’t have income won’t qualify for a mortgage these days. As they can’t guarantee whether the money you say you have will still be there after they approve the loan, they want to make sure that you at least have the income to justify the monthly payment.
Another group of people that this trips up are people with irregular income, like sales people on commissions, or self-employed individuals. One way to show proof of your earnings power is to provide the past two years of tax returns and also your current income, like pay stubs or an income statement for the self-employed that is prepared by a CPA.
6. Get Electronic Copies of Everything
Before you get a loan, you should (if you don’t know already) figure out how to download electronic copies of your statements. In a typical high yield online savings account, this could be easy but for other institutions where you are used to getting paper copies, you might have to dig a little deeper. Unless you want to pull your hair out with fax machines and printers, a much easier way is to communicate with your loan officer through email and send him copies of everything electronically. Trust me, it will make your life so much easier.
7. Keep Records of Your Communications
Another reason why you want to keep your communications with your loan officer through email is because it provides proof of what’s been promised. It’s not unusual for a loan officer to say things that might end up being contradictory, like the terms of the loan, for instance.
If you were promised a better term than what you are presented near the end of the loan process, you have a much better argument with everyone involved if you have written proof of what the loan officer stated from the get-go.
[Consumer Resource: Understanding Your Debt Collection Rights]
8. Only Apply if You Can Afford the House Comfortably
If it wasn’t for the financial crisis, I would never think that this is worth mentioning but as we’ve seen, not everybody will think through their financial situation for even a huge purchase like their home. Make sure you can afford the house before you even think about sending an offer. This is especially important for first time home buyers, who, through the encouragement of realtors, can end up buying “too much house.”
This is a guest post written by David Ning, who offers practical personal finance advice on a daily basis at MoneyNing.com.