There are very few things throughout the homebuying process more frustrating than a loan officer’s sloppy system resulting in your loan being denied. But how do you know what you need, when you need it and how to sift through the endless paperwork you’ll be asked to provide?
To help you improve your odds for approval and avoid many of the headaches associated with the loan process, I’ve outlined my Top 5 Ways to Get Your Loan Approved the FIRST Time!
1. Give a Complete Loan Application - As the saying goes..”the devil is in the details” and it’s those teeny tiny details that will cause delays or worse. Many Loan Officer’s don’t take the time to ask important questions related to your employment & credit history. Giving a thorough loan application includes more than just supplying the information found on the Residential Loan Application ( click here to better acquaint yourself with this form). It also includes offering information that you may not feel relevant.
For example: You recently took two months off from work to care for your ailing mother.
Why this is important to your lender: No matter what type of loan you are qualifying for (FHA, VA or Conventional) your Loan Officer will be required to explain and document any gaps in employment. The best place for you to start with a situation such as this or anything else you feel warrants further explanation is to write a detailed letter clarifying the what & why behind it. Believe me, your Loan Officer will love you and the underwriter will appreciate your candor.
The standard items you will need to bring to your appointment:
2. Credit – Your credit score can make or break your chances for loan approval so know what yours is before you sit down with a Loan Officer. Get your free annual report here. It’s also important to know how to maintain good credit or rebuild bad credit. Linda Ferrari, the industry’s top credit expert has written a 10 Step Action Plan which you can download for free. Her site is also jam packed with useful tips and helpful hints on credit scores & reporting so take your time perusing through it.
Remember! You will have to explain any derogatory credit i.e. collections, late payments, bankruptcy or foreclosure so write that explanation letter before your appointment!
3. Document, Document, Document – The loan process can feel as much fun as an anal probe and just as invasive. The name of the game in the mortgage industry is to document everything. The more you can provide on the front end, the less likely it is that you’ll spend countless hours digging up additional paperwork throughout the process.
For Example: Your grandma decided to give you an early graduation present of $10,000.
Why this is important to your lender: It might not seem like a big deal to deposit it within your checking account, but it is for your underwriter. Any large deposit (a deposit larger than your typical monthly earnings) that shows up on your bank statement within the last 60 days will need to be documented. You must prove who you received the money from and supply proof of the deposit.
4. Employment and Income Information - Your Loan Officer will need your last 2 years employment information including your title, type of business and contact information. They will also need to verify your employment so make sure you can provide your HR contact or if your employer requires that information be verified online, your Loan Officer will need your salary key.
A few “gotch-ya’s” depending on your employment type:
W-2 employees – If you’re claiming “unreimbursed business expenses” on your tax returns, your Loan Officer will be required to net these against your gross income. Don’t forget to bring this up at your first meeting. This could be a deal killer depending on the amount!
Self Employed – Calculations will vary depending on whether you are a C-Corp, S-Corp or Partnership. However, the bottom line in all instances is that your Loan Officer will be using your net income. Make sure you provide complete copies of your personal and business tax returns for the last 2 years. Otherwise, they will be unable to correctly calculate your income and render a pre-approval.
Bonus & Commission Income – In order for you to qualify using bonus and/or commission income, you will need to prove a 2 year history. Your Loan Officer will request verification from your employer asking them to detail your last 24 months worth of income. They are then required to use the 24 month average, not the figure displayed on your most recent paystub.
5. Be Prepared!!! - The more homework you do before you meet with your Loan Officer, the more comfortable you’ll feel. Not having the documentation and explanations we’ve discussed above will only cause delays. Not fixing your credit will mean higher interest rates. Burying your head in the sand is not an option! The more you can provide immediately, the less stress you’ll feel as the transaction progresses.
Most importantly…be upfront with your Loan Officer. Their job is to guide and direct you through the process. In the mortgage industry, what your Loan Officer doesn’t know CAN kill your loan. For example, if you anticipate making any major changes to your financial situation, notify your Loan Officer immediately. Likewise, if you feel there’s additional information they need, pass it along. Too much is better than not enough when it comes to documentation.
Lastly…Don’t put off until tomorrow what you can accomplish today! Click the “Pre-qualify Now” link at the top hand right side of this page and you’ll be directed to our secure online application. Once you complete your information, I will be in touch with you immediately to discuss your financing options!
