Mistakes to avoid while your loan is in process

by Tom Tousignant

in Blog, Mortgages, Refinancing

With mortgage rates are hovering near all-time lows, you may want to take advantage of refinance and home buying opportunities.

The downside of today’s unexpectedly-low rates, though, is that mortgage lenders are ill-equipped for the rush of new business. As a result, the process of underwriting and approving new mortgage applications is taking some lenders as long as 2 months to complete.

With all the lending guideline changes of the past few years, it’s important for applicants to remember that mortgage approvals can be goofed  up at any time prior to funding.

For a mortgage applicant, there are many events that are out of their control — job security and health matters, for example. But there are also events that are within their control.

Knowing that mortgage approvals can be fragile, here are 8 things that could affect your loan approval, or even get your approval turned down.  Your loan officer is the first point of contact before you do any of these:

  1. Don’t buy a new car or trade-up to a bigger lease.
  2. Don’t quit your job to change industries
  3. Don’t switch from a salaried job to a heavily-commissioned job
  4. Don’t transfer large sums of money between bank accounts
  5. Don’t forget to pay your bills — even the ones in dispute
  6. Don’t open new credit cards — even if you’re getting 20% off
  7. Don’t accept a cash gift without filing the proper “gift” paperwork
  8. Don’t make random, undocumented deposits into your bank account

Now, avoiding these items may not be practical for everyone. For example, if your car lease is expiring and you need a larger vehicle, it doesn’t mean you can’t buy the car — just check with your loan officer first to be sure the new payments won’t “break” your approval.

The same goes for accepting cash gifts from parents. There’s a right way and a wrong way to accept gifts and doing it the wrong way may prevent you from using the gift as a source of down payment.

Mortgage lending is full of “gotchas” and with underwriting times stretching to 60 days, it’s a lot more likely that a mortgage applicant will trip into one. Following these 8 rules, though, is a good start.   If you need to do anything financially unusual during the refinance or home buying process, your loan officer should be able to tell you if it will impact your application or not.

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