loan application

Applying for a mortgage is an in-depth process. Along the way, an underwriter will be reviewing your bank statements, tax returns and credit history to evaluate your eligibility for a long-term loan. But, even the most confident borrower can run into unexpected problems if they lack a thorough understanding of the situation. 

If a mortgage application is in your future, or already in progress, make sure you don’t let these overlooked issues derail the journey toward your dream home. 

  1. Troubling Transparency – The path to a successful closing begins with a lender you trust and who can trust you. You’ll need to be comfortable with complete transparency when it comes to your finances. The rigor of the process ensures any issues come to light. An appearance of dishonesty is sure to be the end of your relationship.

    While this may seem obvious, it’s an issue most likely to arise when it comes to the down payment. Early on, your lender will be asking where your down payment funds are coming from, and occasionally those plans can change. If a surprise gift or other shifts in the source of your down payment occur, communicate them immediately to avoid putting an on-time closing at risk. While most mortgages allow for some funds to be gifted to the borrower, they will likely need to be well documented and identified as a gift rather than a loan.

  2. Inconsistent Income – Your ability to pay back a mortgage is paramount to your search for a loan. At the heart of this decision is your income. While tax returns and bank statements will tell much of the story for your underwriter, other factors can play a significant role. An adequate salary may not be enough if you can’t show the consistency your lender wants to see. A job change, particularly if it’s outside your previous experience, can make it harder to get approved soon after. Applicants who are self-employed, contract, or substantially commission-based should expect to be judged based on at least two years of income history.

  3. Adverse Appraisal – One issue that can cause problems has nothing to do with your creditworthiness. A lender’s decision to approve a mortgage is contingent on having a credible understanding of the property’s value. Be sure your offer has comparable sales to back it up, or you could risk coming up short of funds before closing.

  4. Credit Concerns – The role your credit report plays in a mortgage application shouldn’t be a surprise. However, precisely what it shows and when it’s used can catch homebuyers off guard. Not only will it detail your debts, but it can also reveal the bad habit of previous late payments. Personally checking your credit report is an excellent first step, even if you’re currently debt-free. Many lenders will also check your credit multiple times, and just before closing, in particular, so don’t make the mistake of large purchases that can become a red flag.

The originators at Open Mortgage are waiting to help you navigate these and any other obstacles standing between you and your next home. Find out more by exploring our website or calling to speak with us today.

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