These suggestions will help make the loan application go smoothly. The list grows whenever I bump in to a new problem. All of the problems below were caused by borrowers doing something that made it difficult or impossible to close their loan. ALL of them are based on my first hand experience, not hearsay.
Do not take out any loans until after your mortgage loan is closed, new payments may impact income/debt ratios or slow down the process.
Do not increase the balances on credit cards or equity lines. I had a client increase the balance on a credit card by $200 and that knocked 100 points off his credit score even though the balances on his other cards declined.
Do not stop making your payments on time, especially mortgage payments even if your home is sold or if you are refinancing.
Do not go on vacation right before your loan is supposed to close; this happens a lot and can be a huge problem. You will be able to take a vacation after you close. Three problems with doing this, increased credit card debt (see above) may spend funds counted as cash-to-close or reserves and finally we will need something. It is hard to help with items needed for closing if you are in Bora Bora.
Do not bring your children to the loan application or closing, this is the single largest business transaction most families ever make and it deserves your undivided attention. A $20 tab for a babysitter is a lot cheaper than a $20,000 error in judgment because of an interruption. It is not that we do not like kids, we simply need to focus on your money on both occasions. Funny, as I write this there is a baby screaming down the hall.
Do not switch around funds from one account to another without checking with the loan officer first. Tracking funds for the closing becomes very difficult if there is movement during the process.
Do not have your relative(s) give you gift funds by check before the closing. Have them wire the funds to the closing. If not we will need to verify that the relative has the funds in their account and many of them do not want to provide copies of their bank statements. Wiring funds cost money, can they give you a check instead? Absolutely, just be sure they know we will need a copy of their last bank statement showing the funds, all of the pages! And have your loan officer help with the transfer.
Do not white out or mark out information on the support documents, the underwriter is not allowed to use documents that have been altered. I have seen borrowers mark out everything on bank statements and pay stubs except for the totals. Really a bad move if the deletions are on the originals, makes it hard to replace them.
Do not switch jobs without first discussing with the loan officer. Seems logical enough but it happens all the time.
Do not bring a check to closing drawn off a bank other than the one on your loan application. We must track all funds used at the closing.
Do not keep changes on anything a secret. For example, if you want to change the loan amount at closing it could be a very big problem. I just received an email this morning saying my closing this afternoon has already funded. That is a comforting feeling as long as there are no changes. They know I am thorough but people do wait to discuss things at the closing!
Do not put anything on the loan application that is not true. It will come out because everything is cross checked and wrong information could derail or stop the process.
Do not take possession of the house you are buying before taking title without discussing it with your loan officer. Especially on an FHA loan, it will delay the closing for months.
Do not buy a fixer upper without discussing it with the loan officer. Depending on the seriousness of the problem it could be very difficult to finance.
Do not write purchase contracts on more than one owner occupied house at a time. I don’t know, I just work here.
Do not apply for an owner occupied loan if you are not going to live in the house – happened to me twice so far this week. Everyone knows interest rates are higher on non-owner occupied loans, peanuts compared to what happens if you get caught. The same government that audits banks and mortgage companies is the same one that audits you. Tell me you are not going to do this and not change your address on next years’ tax return.
Do not put income on the loan application that you have not reported on tax returns. See above.
Do not bring your girl friend to closing pretending to be your wife, HAHAHAHA.
Do not sell things to raise money for down payment and closing cost without first discussing it with your loan officer. I had a fellow sell a junk car once without any paper trail. Try to track that.
Do not make deposits to your bank accounts that exceed your income without documents to support the source. We must track all funds used at closing. What about money from the cookie jar? Buy some cookies!
Do not smoke that funny stuff before coming to the application or closing (last Thursday). Same goes for tipping a few, years ago had a lady passed out in the closing attorney’s lobby BEFORE the closing. Celebrate AFTER the closing.
Do not make a side deal that is not on the purchase contract with the seller. In fact, if you must think about how to “get around something” don’t do it! I have clients ask me all the time, “How do I get around that.” Don’t forget which government is going to audit this loan file.
Do not dispute accurate information on your credit report!! There is no statute of limitations on mortgage fraud. I do not care who told you this is okay, it is NOT okay. Yet I see credit reports all the time that obviously have been “repaired.” Saw one last week where the applicant had disputed a bankruptcy and it was re-affirmed. The automated underwriting programs have changed recently; unresolved disputes may cause the loan to be rejected. Every try to dispute a dispute?