Getting a mortgage can be stressful and confusing at times. With all the changes in the loan application process, you need organization. It is important to be ready to make an offer as soon as a property you like comes your way. If you do not have your loan items lined up, you will likely not be able to close in time. Getting a loan is more difficult than it has been in the past, but it doesn’t have to be that way. You need to do some work before you apply. There are steps you can take to make things much easier for you. Following these four steps will increase your chances at getting your loan approved:
Know your credit: Getting a loan starts with your credit. You should know your score as well as what is on the report. Credit scores fall between 350 and 850. Any score over 720 is excellent. Conversely, anything under 500 is poor. Most loan programs need scores over 700, with some going as low as 650. Paying debt on time alone is not enough for a high score. Payment history, availability of balance and number of open accounts are all important in determining your score.
It is equally important to know what exactly is on your credit report. It is not uncommon to have inaccurate liabilities on your report. To remove these takes time. Every day they aren’t removed lowers your score. Your credit report will also show all the monthly payments . By knowing your credit score, you can see which items should be removed. There are many websites where you can find your credit score – free of charge. You can also get alerts of any changes in your score or new accounts opened. The loan application starts with your credit score and credit report. Make it a point to know where you stand.
Deposit down payment money: Even if you have money to close, it may not be enough. Most conventional loan programs need the money to be in an account for at least sixty days. The lender needs verification of any large deposits or withdrawals in the last two months. The sooner you can get your money into the bank, the less problems you will have. Not only will this make things easier, but it may also save your loan application. Banks are strict on deposit seasoning, and if you do not have the full sixty days you will have to wait to close. They need this to avoid borrowers getting the money from a loan or a gift that is not reported on the credit report. Depending on your loan application, you may also need to have assets in reserves to close. This money also needs to be in your account for at least 60 days. Get all closing cost, reserve and down payment money into an account as soon as possible.
Organize income documentation: You are going to need to document your income. If you receive a W2 and a paystub, your income documentation is easy enough. Keep your last two paystubs and two years of W2’s on file. If you are self-employed, the lender will take an average of your last two years of adjusted gross income. This means you should have the full tax return as well as a year to date profit and loss statement. Some lenders have bank statement only program alternatives. Either way, you should have your income documents stored someplace where you can retrieve them. If you have rental property, get your leases together. If you have a part-time job, have information for that employer ready as well. It is important that your income is as up to date as possible. If you have a tricky income situation, speak with a lender or mortgage broker before you apply. There may be certain programs that you are eligible for that you were unaware of. Stated income loans are long gone. If you want a loan, you need to have all income information ready.
Keep documents handy: The biggest reason loan applicants don’t like the process is because they don’t have documents ready. If you know what you will need and know where to find it, the process isn’t that difficult. It is a good idea to create a folder or spreadsheet with all the items you need. Whatever you think you need, put it in the folder. Let your lender tell you what they need. Every day that you have to scramble to find a document you decrease your chances of closing. This could mean the difference in getting your offer accepted and missing out on a property you want. Have your credit report, bank statements and all income documentation available. Talk to a loan officer to find out if your situation is unique. The more items you have available, the easier the process is.
The loan process is as simple or difficult as you make it. If you expect the items you need in advance, everything will be much easier. Although the loan process is more difficult, lenders still ask for the same items. If you have not updated your pre-qualification letter in a while, you should do so. What you thought you could do in the past may not be the same today. By having these four items in place, you can close your loan in 30 days!