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4 Tips To Present a Stronger Mortgage Application

As underwriting guidelines for lenders become more stringent, it becomes clearer what a good mortgage application looks like. As prospective home buyers begin their search, there are a few things they can do to help get their loans approved (and with the best possible terms), and, at the same time, lessen some of the stress that goes along with the mortgage process.

1.) Income Documents

Most lenders want to see a full month of pay stubs and two year’s complete Federal Tax Returns. Assembling them ahead of time and holding on to every pay stub you get is a good idea that will save you time later. Moreover, looking at those documents and being prepared to explain any deductions that show up is crucial. Child support, alimony, garnishments, and Unreimbursed Employee Expense are often crippling factors that, if explained and dealt with upfront, can make your loan approval smoother.

2.) Asset Documents

Most lenders will scour your bank accounts for the two months prior to going to contract. They are looking for large deposits because they can signal a new loan that wouldn’t show up on your credit report yet. What’s a “large deposit”? Typically, any deposit that would represent more than your representative income. If you make $5000 a month, after taxes you likely net $3800 (or $1900 a bi-weekly pay period); therefore, deposits in excess of that will need to be explained and documented.  Sold a motorcycle? Have a paid receipt and motor vehicle documents in place.  Got a gift? You will need a Gift Affidavit, proof of the donor’s ability, and transfer of the funds. Any and all questions should be discussed with your loan officer.

3.) Credit Score Optimization

Do your best to curtail your use of credit as it relates to your available credit lines. Target a cap of 30% of usage of available lines to get the best scores. Do NOT cancel credit card, as that will lower your amount of available credit, thereby raising your percentage of usage. That will damage your score. Do NOT shop for a car, explore life insurance, look to get a new credit card, or increase the limits on your current cards because the running of your credit by people in other industries will also lower your credit score. Most importantly, don’t do anything that will require having your credit run without first discussing it with a mortgage professional who knows the impact it could have.

4.) Appraisal Concerns

It’s unlikely you will make an offer to purchase without checking out comparable home sales. It’s also likely you received that type of data from the real estate agent you are working with. Make sure your agent prepares the same information for the appraiser. Data about similar sales, similar homes currently available, and maybe even cost estimates for any repairs or improvements anticipated can preempt future problems with appraised values and conditions.

Overall, it is recommended that you hold onto copies of everything financial, think before allowing your credit to be run, and you work with an agent and loan officer who can use their experience to put your loan application in its best possible light…as soon as you start thinking about buying a home.


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