Making the decision to become a homeowner is one of life's biggest decisions. Planning and preparation is the key to achieving the goal within the desired time frame. Being an active participant in the home loan process will make it easier for your dream to become a reality. Here are a few tips:
1. Educate yourself about the home loan process. Get an understanding of the role of each party involved. Explore your loan term options. Learn about the approval process. Find out about the time frame from start to finish and what could cause delays. Banks, brokers, and Realtors often host homebuyer’s seminars and workshops to educate prospective buyers. Make arrangements to attend one.
2. Order a three bureau (Experian, Trans Union, and Equifax) credit report. Check for incorrect items, duplicate entries, previous addresses, employment information, and inquiries. A report may be obtained free annually or for a nominal fee with a credit report provider.
3. Resolve any credit issues that are currently outstanding. Make payment arrangements for delinquent accounts and/or collections. Your lender may require you to document the status (i.e., proof of keeping arrangements) as well as provide a written credit explanation. Send letters with supporting documentation to the credit bureau to have corrections made. If issues are resolved, be sure to document when and how it was resolved. If there are no credit issues, then you’re one step ahead.
4. Plan for cash needed to cover down payment and closing costs. Set a realistic budget for your new purchase. Analyze your spending and cut back where possible. You will need to document the source of your down payment and closing costs funds. Inability to do so may result in the denial of your loan. In most cases, cash on hand is not acceptable. Lenders may also require that funds be seasoned (on deposit) for a specified period of time (i.e., 30, 60, or 90 days).
5. Be prepared to provide a lot of paperwork to document the information that appears on your loan application. It will be necessary to document your income, your assets, items that affect your credit rating, and other circumstances such as divorce or bankruptcy. Your loan officer will provide you with a checklist that lists the items that will initially be required for your loan file.
6. Be prepared to be actively involved in the process. Help your loan officer by providing as much information as possible about your situation. Withholding information could adversely affect your chances of approval. You may also be required to provide items that you must obtain from a third party. Make your best effort at providing the additional documentation in a timely fashion. Extended delays may cause your loan approval to expire. A new approval could result in less desirable loan terms (i.e., a higher interest rate or lower loan amount).
7. Don’t make any significant purchases before or during your loan application submission. This could adversely affect your debt ratios and/or deplete the necessary cash reserves.
8. Stay positive. The process can be challenging but the reward is great. The better the pre-application preparation is, the easier (and shorter) the process will be for you.
Stephanie Graham is a mortgage professional with more than two decades of experience in both retail and wholesale lending. Stephanie has excelled in a number of positions including CRA officer, corporate trainer, consultant, and as an executive of Complete Mortgage Processing. More tips and techniques for mortgage processing and origination can be found at http://www.completemortgageprocessing.com
