Mistakes & Misconceptions about getting a mortgage

Getting a mortgage is considered by most people to be the most stressful & confusing part about buying a home. A lot can go wrong, and if you're out to buy a house you must avoid some common pitfalls that can stop you in your tracks. 

1. Waiting until you have 20% down payment. With so many grant programs and down payment assistance financing available, you can take advantage of record low interest rates now and might not need much IF ANY down payment

2. ONLY SPEAKING TO ONE LENDER.  Not every bank, mortgage broker, or loan officer is the same. Some lenders offer programs for people with less then great credit, while some banks have strict policies that require a minimum of a 640 score or better. Just because one lender told you no, doesn't mean you might not qualify somewhere else. Realistically, if your credit score is under a 580, you'll have to do some credit repair before anyone will lend to you, but we can help you improve your scores if your credit is currently challenged. 

3.  PRE-QUALIFIED VS PRE-APPROVED.  If you want to buy a home, skip the pre-qualify and go with the pre-approved.  The difference is clear. A prequalification is simply a lender doing a quick overview of your credit, income , and assets and giving you the thumbs up. A preapproval involves submitting ALL of the documentation necessary to receive a full and written mortgage approval. An underwriter will review your file and issue you an approval based upon your finding a home. As long as your credit, income, and assets remain where they were when the preapproval was issued you should be ready to buy (if they improve, that is of course even better and you may even qualify for a lower interest rate).

4. MOVING MONEY AROUND    Shifting large amount of money in and out of your accounts is a major red flag. If you are under contract to buy a home, your money should stay put. If you need to make a purchase or move money from one account to another you absolutely should discuss your plan with your loan officer prior to completing the money-moving.  

5. APPLYING FOR NEW CREDIT  Very simply... don't do it.  Underwriters do not want to see new credit accounts opened, and this can be the difference between going to closing or being flat our denied. New credit accounts can also drop your credit scores when the credit is 'new' in addition to the new monthly payment for the account being counted against your DTI (debt to income ratios).  As tempting as it may be to go open a new credit card to finance your new furniture, it is highly recommended that you wait until after closing. You can legitimately leave the closing table and head to Ikea and open a new account, but you should wait until after your closing is what is called "closed and funded," and you have the keys in your hand! 

6.  CHANGING JOBS  Even if you will still be making the same or more money, a job change can be a deal breaker for getting a mortgage. Lenders want stability, so changing jobs may put you into a higher risk category if the lender decides they no longer view you as a 'stable borrower.'  If your loan was approved based on the income from the job you hate, suck it up and wait until your loan is 'closed and funded,' and then you can change jobs as soon as your loan has been completed. 

The simplest plan you can follow once you have been pre-approved is to keep everything in your life the same or as close to the same until you receive the keys to your new home.  

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