Whether you’re thinking about buying a home now or a year from now, the right time to visit with a mortgage professional about your financial situation and is as early as possible. Our objective is to make the home loan process and getting a mortgage as seamless as possible for you. There are some sure fire ways to make it more stressful and we would rather speak with you before you make some common mistakes that could make getting a mortgage more challenging.
The media may have you believe that getting a mortgage today is very difficult and that the standards are out of reach for a great number of people. While the standards for mortgage lending have certainly tightened up, I work with and finance a large number of clients on a monthly basis. Mortgage lending is alive and well and people can qualify for buying a home today. There are some simple things that we need to verify, like the fact that you have decent credit, are employed and have verifiable income to repay the loan and that you have enough down payment to purchase the home from any number of acceptable sources.
Here are a few of the real challenges that people encounter:
• Depositing cash – recently a number of my clients have come to me, with large, non-payroll related deposits into their bank accounts. Pure cash is not an acceptable source of funds for down payment. If you are selling something of value – make the purchaser get you a cashier’s check, and save a copy of the check before depositing so that the funds are traceable. Also don’t forget to get write up a bill of sale or some sort of receipt that states what was sold, when it was sold, to whom it was sold and for what amount. If it was something like a car – a copy of the title transfer will work. Understandably, we need to verify where all money for down payment comes from and cash is simply one of those things that is not traceable. Where’s the concern? A couple potential options we need to prove against – you could have taken out a loan that we aren’t aware of or, possibly received the money from someone who is part of the transaction. Neither of these are acceptable. We simply need to be able to verify where money came from or, we can’t use it toward your required down payment.
• Depositing “other” non-payroll related monies – You guessed it, we need to verify it and it’s source. For any deposit that is not payroll related, we will question where the money came from and request proof of the deposit in the form of a copy of the check deposited etc. Depending on the source, and your loan type, we may or may not require additional documentation. We do use common sense. If you’re a home buyer who has plenty of money in the bank after we subtract out any non-payroll related deposits and|or the deposits are minor in comparison to your monthly earnings, we likely won’t question them. But, if you need most of what’s in your checking account to close on your home and you have a series of unexplained deposits or even just a few large ones, this could pose an issue. Best solution? Don’t deposit non-payroll related funds into your bank account. The most common source of non-payroll related money in bank accounts is gift funds. While gift funds are an acceptable source of funds for some mortgage programs for down payment, there are still specific processes that need to be followed for verifying the gift and also your remaining money available for closing. If a gift is deposited prior to closing, it can make for a few extra hoops. Again, visiting with me first will help pave the way for getting a mortgage and having a smooth loan process.
• Credit Woes – It’s not uncommon for me to start a conversation with a client and find out very quickly that there are some past credit issues that will prevent them from getting a mortgage right now. Items like prior bankruptcies, foreclosures or short-sales can be show stoppers if not enough time has passed or, if new, positive credit isn’t there. Understandably, a number of people will decide that they don’t want to go out and obtain new credit following a bankruptcy or foreclosure. While this makes absolute sense to me, it could prevent you from getting a mortgage downstream depending on where your current credit score. My advice? Know your credit score and get advice from a mortgage professional at least 6-9 months prior to your intended move date when you’ve had prior credit challenges. If you’ve had a prior Chapter 7 (debt elimination) bankruptcy, you will need to wait 2 years from the discharge date to qualify for traditional financing. This means you should be visiting with a mortgage lender at least 6 months prior to the 2nd anniversary of your discharge. If you’ve had short-sale or foreclosure, in general terms you will be waiting for 3 years from the sale date, though it totally depends on your prior loan type and your particular situation and rare exceptions to the 3 year rule are made. I am happy to visit with you about your situation and get you on a new path to buy your next home. It’s best to start the process early so that we have the time we need to work out any unresolved issues.
• Income Stability- Recently moved from a salaried position into a commissioned one or went from a W2’d position to a 1099? This changes the mortgage qualifying game dramatically if you don’t have a history of these types of earnings in the past. Be cautious about making job changes or changes to your income without visiting with a mortgage professional first. If you intend to purchase a new home in the next year, this could mean the difference between you being able to qualify or not. I know what you think – this is a pay increase, or this is an improvement from my last job on so many levels. While I understand that, the potential it offers you also lends to the ability to not earn as much and what the amount will actually be is something that we need to have historical data on in order to use it for qualifying. We don’t know and can’t prove that you’re going to be a stellar sales person and earn double what you did before. In general terms, if you switch to commissioned income or 1099 pay, we will need a 2-year history of that income before being able to use it. However, your saving grace may be a guaranteed minimum or your base salary – if it’s enough for you to qualify. Again, I’m always happy to discuss with you and each individual situation will vary.
This is certainly not a comprehensive list of all of the potential issues when getting a mortgage loan today, but some of the common issues clients encounter. Apply for a loan early and getting the advice of an expert on your particular home loan scenario is a key element in pre-approval success.
I work for Cornerstone Mortgage Company and is a full-service mortgage lender. We offer Conventional, FHA, VA, RD, Minnesota Housing loans for first time home buyers and many down payment assistance and closing cost assistance programs for first time home buyers as well. Whether you’re buying your first home, a new home, thinking about refinancing or remodeling your current home, or purchasing a second home or investment property; we have a loan program to meet your individual needs. Apply Online and we’ll be in touch to discuss your options. Prior credit issues? We offer no-obligation credit consultations and will help you get on the right path to buy your next home. Did you know, if you haven’t owned a home in the last 3-years, you may be eligible to receive first time home buyer benefits again? Contact me for more details.
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