Michelle Elliott, a senior home lending adviser with Chase, has seen a lot in her 33 years of helping folks obtain funding for home purchases and refinancing – 11 of those years with Chase.
Mostly she has seen happy people realize their dreams of homeownership. But occasionally, folks do things during the mortgage application process that make it difficult or even impossible to be approved for a good loan in a timely fashion.
About 20 years ago she was given a list of dos and don’ts that she thought would be helpful to her clients, so she typed it up and, over the years, reworked it to come up with 11 Commandments for clients during the application process.
“A loan officer is a trusted advisor,” she notes. “All topics should be reviewed and discussed in advance to set proper expectations.”
This list allows her to go over important information in a light-hearted way, putting her clients more at ease.
Humorous though it may be, the items listed are serious and very important for those seeking a home loan.
Here is Elliott’s list:
1. Thou shalt not cosign for another during the mortgage process. It’s important to understand that even as a co-signer you are 100 percent obligated to the debt even if someone else is paying it.
2. Thou shalt not change banking institutions. Full disclosure and a complete paper trail of all assets are required for the 60 days prior to application through closing date. A loan officer can assist with movement and documentation requirements; it should not be a surprise.
3. Thou shalt not make large deposits or withdrawals. Any deposit or withdrawal in excess of a payroll deposit amount could be questioned. A paper trail and source of funds is required for large deposits. The underwriter on the loan will question where large withdrawals are being moved to ensure assets are not over counted. Underwriters are also trained to review recurring debts on bank statements to ensure full disclosure of liabilities.
4. Thou shalt not originate any further credit inquiries. Each credit inquiry can have an adverse effect on your credit score and may lead the underwriter to believe you are not committed to the process or that you may have additional liabilities that he or she will be required to include when figuring your debt-to-income ratios.
5. Thou shalt not go furniture or appliance shopping during the loan process using credit. Any added expense is figured into those ratios and may preclude you from qualifying.
6. Thou shalt not use credit cards excessively (or fall behind on those that you have). Credit is a key component in the pricing of mortgage loans. The way a borrower manages his or her past history is an indicator of future management and responsibility. This means stay current on your present mortgage. Payoff demands reflecting late mortgage fee can be disastrous.
7. Thou shalt not omit debts or liabilities from the application. Full disclosure and honest communication is required with your loan advisor. Timeshare liabilities and maintenance fees, solar loans and leases, cosigned mortgages, cosigned auto loans, and credit card debt should all be disclosed and discussed.
8.Thou shalt not spend money that is set aside for down payment and closing costs (such as obtaining gift funds and then spending it). A loan officer is reviewing the application to ensure there is sufficient cash for down payment and closing costs. Additionally, most loans require borrowers to have money in reserve.
9. Thou shalt not get into contract and immediately leave for vacation without discussing with loan officer (and Realtor). It’s imperative that you are fully engaged and present in the process. If your loan officer knows you will be gone, accommodations can be made ahead of time to obtain Specific Power of Attorney, if needed, plus alternative forms of communication for follow up discussions and requirements.
10. Thou shalt not buy a car, truck, motorcycle or boat during the mortgage process (or you may end up living in it!) Added expense prevents many clients from qualifying for home loans.
11. Thou shalt not change jobs, become self-employed or quit your job during the mortgage process. Most often, a job offer letter and at least a first paycheck will be required prior to closing a mortgage if you have made a change. Self-employment will require a minimum of two years reported income on tax returns.
“No job equals no income equals no qualification,” the list concludes. “Lenders will typically check employment twice, once with a written confirmation early in the process and again just before funding the loan with a verbal verification of employment.”
An experienced, knowledgeable loan officer such as Elliott can help walk you through the loan process.
And, of course, if you don’t know a good loan officer, contact your local Realtor today to refer you to one.
Cher Wollard is a Realtor with Berkshire Hathaway HomeServices Drysdale Properties, Livermore.