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When buying a home, the success of the transaction depends on two things: The home inspection and your mortgage approval. The seller needs the house to pass inspection, but as the buyer, the purchase hinges on your mortgage application being accepted both before and after you make the bid. What most new home buyers don’t realize about their mortgage process mistakes is that this process is not as simple and straightforward as it seems. Even after you have been pre-approved to buy a house at the stated amount, your loan approval is not assured until the purchase is closed and the mortgage is actual.
There are many common mortgage process mistakes that first-time (and even second or third-time) home buyers can make between applying for a mortgage and closing on their new home. Here at Metropolitan Mortgage Corporation, we care about helping you avoid those mortgage process mistakes so that we can share your happiness with mortgage approval and becomes proud new homeownership.
To that end, let’s take a look at the seven most common homebuyer mortgage process mistakes during the mortgage process and how you can neatly avoid everyone.
Mortgage Process Mistakes
1. Making Big Changes to Your Finances After Applying for a Mortgage
When you apply for a mortgage, you are pitching your current financial status to a loan officer who will then assess that status and get back to you on how much loan they can extend and the rates available to you. However, any major change in your financial status, including all of your accounts, debt, and income, can also change that calculation and its’ results. This means your loan officer will have to start over on underwriting and approving, and your approval when you’re ready to buy may not match the approval you had initially.
Always try to avoid making any major changes to your finances between applying for your mortgage and closing on the house. Here’s a quick crash course on what not to do. Don’t:
- Take on new debt
- Make a big purchase
- Accept a large gift
- Co-sign for another person doing the above
New debt is bad news, as it changes your debt-to-income ratio and influences a key indicator of your lend-ability. Big purchases and even large deposits into your accounts that are non-routine income can also cause an irregularity that will worry your lenders. Taking money out, putting money in, or generating more debt should all be avoided.
At the same time, you should also avoid co-signing for anyone else who is making a big financial move, as this will directly affect your own credit report and rating.
2. Responding Slowly to Requests from your Loan Officer
If you are waiting for your first pre-approval or the final mortgage approval, stay by phone. Delays are a natural part of this process because underwriting is a careful and diligent process, and sometimes your loan officer may discover that they need a few additional details or documents from you. In this situation, they will call you or send an email but may not be able to move forward until you provide the requested documents.
By responding promptly, you can help to accelerate the underwriting process so that you can begin bidding on homes or move more rapidly toward closing on your dream house. Responses may include providing direct information or scanning and emailing copies of documents to provide proof of this or that financial detail.
3. Forgetting to Notify Your Loan Officer When…
The good news is that if your plans change, you can let your loan officer know, and they will smooth out the difference without risking your application being rejected outright or, more profoundly, delayed. However, many first-time home buyers forget to notify their lender and wind up sabotaging their own mortgage approval with spontaneous or even necessary activities.
You Are About to Make a Big Financial Change
If you need to make a big purchase or are about to receive a large non-typical payment, call or email your loan officer. A heads-up significantly reduces the risk that you are making irrational or impulsive financial decisions during an important time.
When Your Employment Changes
If your job is going to change in title, income, location, or employer, tell your loan officer. We can’t always help when a change in employment occurs, but the stability of your loan approval depends on that employment – so securing similar or better income is essential for the status of your loan.
If You Are Going on Vacation
Lastly, don’t forget to tell your lender if you will be unavailable or on vacation during the home-buying process. Try to avoid being out of touch, but communicate your unavailability if this occurs.
4. Unexpectedly Resolving Debts
Here’s a surprising mistake: Don’t resolve debts while your mortgage is being approved. We know this one sounds a little counterintuitive. Of course, you want to improve your credit rating. By correcting debts and credit report records to improve your home loan prospects, right?
Technically, yes. But adding debts also counts as a major financial change. This will cause your lender to have to do the loan underwriting calculation all over again. Instead, try to make sure you repair your credit. Pay off and close out accounts, or dispute discrepancies on your credit report before your initial mortgage application. This will improve the rates you are offered without causing chaos down the road.
5. Opening or Closing Financial Accounts or Cards
After you have applied for a mortgage, don’t start opening or closing financial accounts. Don’t take out a new credit card or close a bank account. Paying out and closing accounts where you’ve had debt or even disconnecting from financial services can have an impact.
Many, many companies now make reports to the credit bureaus, and not just typical bank accounts. Investment apps and money management apps, conventional and unconventional card providers, and accounts that primarily handle your money should be opened or closed with caution, as it could change your credit report details.
6. Miscalculating Your Closing Costs Budget
One very important mistake to avoid is miscalculating your closing costs. This relates both inside and outside the mortgage process. Many mortgage lenders ask for a small closing fee. This goes along with a basket of other closing fees. Like your title checks, real estate lawyer fees, paying the inspector, and so on. Make sure that – after escrow and down payment – that you still have enough in-pocket funds to cover the closing costs and initialize your mortgage.
7. Being Unavailable for the Inspection and Closing Appointment
Finally, be sure to make yourself available, especially as closing time draws near. You need to not only stay by the phone in case your lender needs a few last-minute answers or documents. You also want to keep your schedule open for those important appointments where you need to be present. Professionals are only available during certain time windows.
Your home inspection, for example, is a must-attend event. You want the inspector’s report directly and the freedom to ask questions. When it is finally time to close on the house, you will also want to make sure your schedule is open for the closing appointment.
Successfully Buying a Home with the Metropolitan Mortgage Corporation
Buying a home is a big project, whether it’s your first home or your fifth. Here at Metropolitan Mortgage Corporation, we are passionate about helping new homebuyers achieve their goals through a friendly and successful mortgage process. By avoiding these common mortgage process mistakes, you can speed up your home-buying journey. And secure approval by helping us build and secure the underwriting for your loan from start to finish. Contact us today to explore your mortgage options with the Metropolitan Mortgage Corporation.