Steps To Avoid
When Applying
For A Mortgage
Six Steps
To Avoid
US Mortgage Corporation (NMLS ID#3901). Corporate Office is located at 201 Old Country Road, Suite 140,
Melville, NY 11747; 631-580-2600 or (800) 562-6715 (LOANS15). Licensed Mortgage Banker-NYS Department
of Financial Services- AK, AL, AR, CA, CO, CT, DC, DE, FL, GA, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN,
MS, MT, NC, ND, NE, NH, NJ, NM, OH, OK, OR, PA, RI, SC, SD, TN, TX, VA, VT, WA, WI, WV, WY State Banking
Departments/Regulators. Rates, fees and program guidelines are subject to change without notice. Certain
restrictions may apply. Some loans arranged through third parties. First mortgages only. Not all products and/or
programs are available in all states.
Table Of Contents
Getting Started With The Mortgage Process . . . . . . . . . . . . . . . . . . . . Page 01
Forgetting To Check Your Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 03
Withholding Information On The Loan Document . . . . . . . . . . . . . . . . Page 05
Putting Money Into Your Account At the Last Minute . . . . . . . . . . . . . . Page 07
Not Getting A Pre-Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 09
Not Shopping Around For The Best Deal . . . . . . . . . . . . . . . . . . . . . . Page 11
Changing Your Job . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 13
Getting Started
W ith T he
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Mortgage Process
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Getting Started With The Mortgage Process
Buying a home on a mortgage is not a small decision. It can take a lot of time to get
one. Getting all the paperwork done, while following all the rules and regulations,
can be complex for some. Since it a very important decision (at least on a financial
level), it only makes sense to jump into it carefully. In this document, we are going to
discuss six common mistakes that mortgage seekers make and how you can avoid
them.
Have these documents ready: Before you meet lenders or mortgage brokers, you
must collect the documents given below.
•A list of credit cards, that you are using, and the balance due to them.
•Payroll stubs from six months
•Tax returns filed for last two years
•List of all assets like securities, IRA accounts, personal property, bank accounts,
furniture, and jewelry.
•List of residencies and employment for the past two years.
•Copies of documents such as student loans, bankruptcy discharges, divorce
decrees, child support, or alimony obligations.
Take your check book when you go to apply. The lender may ask for application,
appraisal, and credit check fees. You wouldn’t want to cause delays in your
loan processing.
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Forgetting To
Check Your Credit
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Forgetting To Check Your Credit
Before you start looking for a company or a bank that will give you a home loan,
you should take a look at your credit score. Do you know that a credit score on the
worst side can get the interest rate (percentage) on your mortgage to rise by several
points? The worst case scenario could potentially result in your application getting
rejected. Make sure that you know your credit score early (preferably several months
earlier) so that if you must make changes to make it attractive again, you can do so.
Don’t apply for other credit before the application process is complete:
On a similar vein, make sure that you don’t apply for other kinds of credit till the
application process for the mortgage is complete. If you apply for any other kind
of credit, like an auto loan or a new credit card, while you are seeking a mortgage,
there is a chance that you will be seen as a high credit risk.
This could prevent you from getting the mortgage or even
lead to an increase in the interest rate if you do.
Note that a mortgage is a chance to verify personal
details that you may have forgotten. Don’t
remember your credit score? Pull one out. If
you’ve forgotten details of your past employment
or if you don’t know your exact debt, go into
your filed records and dig out the answers. This
will not only save you work later but will also
acquaint you with your personal finances.
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Withholding
Information On
The Loan Document
If you withhold any personal and/or detrimental credit information, you
could end up jeopardizing your transaction and even your chances of
securing the mortgage. You should always be honest and open about your
finances. Also, note that any information such as pension plan, health
plan contributions, outstanding debts, and even bankruptcy filings can be
verified. By withholding or giving wrong information, you will be committing
mortgage fraud. Also, never ever give false information about your taxes.
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Provide documents as soon as you can:
Many prospective borrowers, when they are asked for additional
documentation, get back days later. This is a waste of time and it can cost
you a lot of money if the rate that you managed to get locked-in expired (and
in the meanwhile has risen). When you are getting a mortgage, you have
to do whatever you can to help with the loan process, including providing
documents on time.
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Putting Money
Into Your Account
At The Last Minute
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Putting Money Into Your Account At The Last Minute
The mortgage company or the bank would want to see if you really are capable of
paying the mortgage every month. But if you don’t have seasoned assets (money
that has been deposited in your account for a few months at least), your application
can end up being rejected. Some borrowers think that they will transfer some funds
from a friend’s or a relative’s account a few days before they apply for the mortgage,
but it wouldn’t hold when the trail is uncovered by the underwriter.
Don’t make deposits that are unusually large into your account, especially when
you are just going to apply for a mortgage. When scrutinizing loan applications,
lenders like to see some stability in income sources and other funds which can
potentially support mortgage repayments. Lenders and banks may get suspicious
(the federal government even gets particularly interested) when they see that a large
sum of cash is being deposited into an account, especially just before a mortgage
application. Your deposit or transfer will be entirely legitimate. Nevertheless it will
lead to questions. It could even trigger IRS audits. So, if you are going to make a
large deposit or a transfer, you will have to be ready. Not only will you need to answer
questions about the transactions, you will also have to furnish documentation.
Always note the entire housing payment:
Mortgage payments will consist of the PITI - principal, the interest, taxes, and the
insurance. Many would-be home buyers make the mistake of not including the
insurance premium and property taxes in their mortgage budget.
To see if a prospective borrower qualifies for a mortgage
payment, the debt-to-income ratio is used. This ratio is
determined when the proposed PITI cost is divided by
the monthly income (gross). For example, when a
homeowner takes a $2400 insurance policy on his
or her home, $200 will be added to the escrow.
Never close under pressure.
While you wait, it may
cost you money but if
you make a mistake
when you close, you
will end up losing
more. Ask for answers,
get things right, and only go
ahead with the loan when
you are satisfied.
Not Getting
A Pre-Approval
Good mortgages come with good preparation. Before you start house hunting, make
sure that you are actually qualifying for the mortgage loan. You can do this by getting
pre-approved. Mortgage pre-approvals are more robust compared to pre-qualification
checks because the lender or the bank will first pull your credit score and look at your
assets, income, and employment.
In a pre-qualification check, the lender will only make an estimate of the mortgage
that you are eligible to take. In pre-approvals, you will be given a go ahead based on
your earlier finances. What loan amount you will be able to afford will not be based on
estimates but hard numbers.
The DTI ratio (debt-to-income) will also matter when you want to know what mortgage
payment you will be able to exactly afford. When you get pre-approved for the loan,
you can ask for a written commitment that the lender will finance your mortgage. This
will show your home seller that you are serious about purchasing the house.
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Don’t chase loan programs that are exotic:
You should certainly look around for the best terms, low closing costs, and better
rates, but don’t do it just by getting lured by exotic loans. If you hear something that
sounds too good, then it likely is. Sometimes the monthly payment is too low. Here
you might be paying only the interest. It is even possible that your mortgage negatively
amortizes (your balance in the mortgage grows every month). It is in your best interest
to keep the mortgage simple. Take a mortgage that you can easily understand, like
fixed rate mortgages.
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Not Shopping Around
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For The Best Deal
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Not Shopping Around For The Best Deal
Just because one lender or a bank has pre-approved you, it doesn’t mean that you
have to take your mortgage from them. Make sure that you inquire around with
various lenders and banks. You can even take help from a mortgage broker.
Mortgage brokers bring mortgage seekers and lenders together. In some areas of the
world, more than direct sales, mortgage brokers bring banks and lenders business.
Mortgage brokers can look into the rates offered by various financial institutions and
get you lowest rates on excellent terms. Don’t end up being one of those people
who obtain a single rate before they apply for the loan. Shopping for a mortgage
is just like shopping for other things. You would look around and try to find the best
rate possible, wouldn’t you? Also, don’t forget that you have to factor the closing
costs as well!
Don’t forget to lock the rate:
You should not forget that mortgage rate means little if you don’t lock it in. If you
are happy with the rate you are getting, you should lock it in. Mortgage rates will
change everyday, even several times in
a day. All the mortgage quotes that you
got from lenders, banks, or brokers
will be just quotes unless you lock
in. Once you lock the rate, you
are guaranteed that the rate
will be available to you until
a given period, say seven
days, fifteen days, and even a
month. But you should never
assume that a rate has been
locked for you unless you
get the rate in writing!
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Changing
Your Job
To get a mortgage approval, another key criterion is steady income and employment.
The underwriter, who works on your application, will be interested to know you are
holding a steady job and that you get a consistent income every month which will
continue in the future (at least the foreseeable). Avoid job-hopping before you apply
for the mortgage. If you are making a job change, it shouldn’t be a problem but a
change in career can cause problems. If you are considering jumping ship, wait till
the mortgage has been closed first.
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Read the loan documents carefully:
Finally, before you sign on the dotted line, you are responsible for reading and
accepting the terms on your mortgage. It can be irritating when you have to read all
those documents before you sign them, but don’t forget that it will be more painful
when you realize that you signed up for a clause that you don’t want or you don’t
agree with. Before you sign, you should set aside some time to understand all that
is written on the documents and only then agree to it. Don’t forget that you can ask
questions, it is your right! Otherwise, you will end up paying for a loan where the
terms are predatory or which you are unable to pay off.
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Now You Are
Ready For The
Mortgage Process
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C orporate O ffice
201 Old Country Road, Suite 140
Melville, NY 11747
On US: 800-Loans-15
[email protected] • www.USMortgage.com
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