Whether you're purchasing a home or in need of a refinance, borrowers are often unaware of how an innocent transaction, such as moving cash from one bank account to another, can create a major problem for their mortgage application process. Below are a few of the more common areas that need special attention. Any one of these items can greatly impact your ability to qualify for a mortgage loan. Avoid "mortgage sabotage" until after your loan has gone through the entire settlement process.
Do not apply for any new credit because that creditor will show up on your credit report. We may have to verify that there is no new, outstanding debt. For example, there have been numerous cases when a mortgage borrower failed to qualify for a mortgage because they financed a car between pre-approval and final-approval. On the other hand, avoid paying off any debt before talking with your loan consultant. Some lenders do not allow you to pay off debt to qualify for a mortgage.
If at all possible, do not change or quit your job during your mortgage process without talking with your loan consultant first. The new position or loss of job could jeopardize your final approval for the loan.
Keep all tax returns, W-2's and/or K-1's, and any other financial papers for the last two years in a convenient place. If you have sold a home, keep the HUD-1 Settlement Statement handy. Save all pages of all bank statements (checking and savings), 410K statements, IRA and/or TSP statements, stock statements and other documents verifying assets. Make sure you have the most recent, 30 days of pay stubs available.
We have to verify all sources of funds for your transaction. Any large deposits made into an asset account (checking, savings, money market, etc) will have to be fully documented as to the source of the deposit. Make sure you keep copies of all bonus checks, gift checks with deposits, documents from the sale of an asset, etc.
Gifts from relatives are very common when a home is purchased. There are certain ways a gift needs to be handled as not to create a paper nightmare for you. If you are going to receive a gift, please talk to your loan consultant before receiving it to make sure the gift is handled correctly.
We have to verify all funds for closing including the source of those funds. Moving assets around can create an unmanageable paper trail for you. The best advice is to leave everything where it is, even if the purpose of the move is to pool your funds for buying the house.
If you sell an asset (i.e. a car, an antique, a baseball card collection, etc.) for cash to help in the purchase of your home, make sure you document the sale (via checks, bill of sale, etc.) and have the appraisal available.
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