Cringe-worthy Mistakes to Avoid during your Loan Process

Cringe-worthy Mistakes to Avoid during your Loan Process 

Annette Bui| Updated May 26, 2020 | Mortgage Programs 101

 Some critical things to remember when you are in the middle of getting a mortgage loan.  Many consumers do not realize the significant impact this may have on the ability to qualify and get their loan funded. Below are some important things to NOT do:

 Employment

Acquiring a new mortgage loan means the primary goal is to show a lender you have consistent cash flow such as your job to repay the debt. Changes in jobs during the loan process or transferring departments can impact your qualifications. I have seen clients switch from getting paid as a W2s employee to being “promoted” to a 1099 position with a higher commission payout. This would be an example of how job change will adversely affect you because lenders would then need to see a 2-year average history of your new income as a 1099 independent contractor.

Large purchases

 Acquiring a new purchase will affect your ability to qualify especially if you acquire a new debt to pay for a washing machine, car etc. Furthermore, the cash reserves you have on hand is assumed to be depleted and lenders like to see you possess at least 2-6 months of cash reserves in the event of an emergency.

Banking

Transferring cash around to different bank accounts mandate issues with having the source where the monies are being moved to and the reason why. Avoid large deposits up to $1,000 and/or lumping deposits in the form of cash and checks combined into one transaction.

 Paying off debt

 Paying off debts is not always a good thing in a lender’s eyes because government sponsored entities such as Fannie or Freddie will require sourcing where the funds came from to pay off the debt in addition to the credit scores changing.

 Marital Status

 Any marital change status can impact your ability to get a loan for states that are community property based. For example, California is a community property state and during a mortgage transaction the title company will need to include your spouse on the title report. Last name changes need to match the most recent corresponding change to be recorded properly along with necessary marriage certificates without a name change and/or relevant divorce decrees.