Wednesday, March 20, 2013

Five Biggest Mistakes When Getting a Mortgage

Once upon a time you didn't need money or a job to get a mortgage. In fact, you didn't even have to have a personal history of paying your bills and you could still get a mortgage. There are even rumors of deceased individuals getting mortgages as owner-occupants but I don't know if that was true or not. But since the mortgage melt-down of 2007-2009 there are much stricter guidelines to get funding for a personal residence. Here is my list of the top five things you DON'T want to do when applying for a mortgage.

 1. Don't keep secrets from your loan officer. The loan officer doesn't approve your loan. He or she prepares your file so that you have the greatest likelihood of getting the loan. He or she can't do that if they don't know about things like a past bankruptcy or foreclosure, or that you are legally separated or divorced with or without child support obligations or that your job is classified as temporary. Spill the beans so that the loan officer can do their job.

 2. Don't take it personally when the bank wants documentation. I agree. It feel like it would be easier to get a top secret clearance than to get a 30-year note on a house valued at $180,000. And it feels like no matter what you say, they don't believe you. But keep in mind they treat everyone the same way. If you were late on a car payment nine years ago, expect to explain why. If your father gave you a check for $500 for your birthday, expect to have to get him to write a letter verifying the fact. That is normal operating procedures for getting a mortgage in 2013.

 3. Do not make cash deposits into any of your accounts. If you've been collecting coins for 30 years and this is what you plan to use for your down payment, well, you might as well be up 'that' creek without a paddle. Banks want a paper-trail. If money has been deposited into your account, they want to know who from and how come and they want proof. Why? They simply want to make sure you didn't borrow funds that you will need to payback after the loan closes.

 4. Avoid job changes. Sometimes simply changing departments can through off a scheduled closing by several weeks. And unbelievably, even if the job pays lots more than the previous position, banks will hold up closing until you have at least one paycheck from the new employer. If you are contemplating a job change, see rule number one. Your loan officer can help you understand the consequences.

 5. Don't buy anything! In fact, don't shop for anything. Now is not the time to shop for a new car for your garage. Nor to you want to purchase furniture or appliances (unless, of course you have that coin collection - see rule number 3.) Every time your credit is pulled it is noted and if the bank learns you are buying appliances or furniture or anything on credit, they very well might shut down your loan application.

 So there you have it, 5 major rules. I've been told that it feels like you've been investigated by the CIA, the FBI as well as the Secret Service when you apply for a mortgage. That is just life in real estate in this day and age.