A recent online discussion among agents ranked the issues agents are dealing with, and not surprisingly, the mortgage approval process ranked high on the list of possible deal wrecking bumps.
The approval and underwriting processes are more stringent then ever, and once approved, banks will reverify to be sure that there have been no changes to the borrower's financial situation.
As a borrower, your goal is to keep your financial situation as steady as possible between application and closing-avoid job changes, don't make big purchases of any kind, and lay off the credit cards in general.
I've got a situation in play right now in which a borrower's earnings were negatively impacted between the time of commitment and final review and it has caused a delay and possible denial of the loan. All parties are jumping through hoops trying to make it work but it is not easy in the new lending environment where the "gray area" is gone and decisions are cut and dry, black and white, yes or no.
My good deed for the day is to share "The Ten Commandments" when applying for a real estate loan. Let's start at the beginning…
Being preapproved by a reputable lender is essential to a successful outcome. In fact, it should be the first step to ensure that you are considering properties you can afford. There is nothing more frustrating than falling in love with a home you can't afford, and conversely missing an opportunity that you didn't realize you could afford. An offer is not considered complete without a strong preapproval from a recognized and respected source.
Now fast forward: pre-approval in hand, you've found your home and negotiated an offer to acceptance, through the attorney review and are now under contract.
It is now time to submit your mortgage application. Once you do, abide by these "Ten Commandments" or risk a delay or outright rejection of final approval of your mortgage:
1. Thou shalt not change jobs, become self-employed or quit a job.
2. Thou shalt not buy a car, truck or van.
3. Thou shalt not use charge cards excessively or let your accounts fall behind.
4. Thou shalt not spend money you have set aside for closing.
5. Thou shalt not omit debts or liabilities from your loan application.
6. Thou shalt not buy furniture.
7. Thou shalt not originate any inquiries into your credit.
8. Thou shalt not make large deposits without first checking with your loan officer.
9. Thou shalt not change bank accounts.
10. Thou shalt not co-sign a loan for anyone.
If you follow "The Ten Commandments"… thou shalt have a smooth closing!