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Let’s face it folks, buying a home (however perfect a time it is to be doing that nowadays) is NOT a simple process. In fact, unless you’re completely straight as an arrow and have absolutely nothing spectacular or noteworthy about your life and financial existence, maybe – just maybe – you may be able to get off easily. But for the rest of us, we usually have a fair amount of explaining to do.
Well, that’s just a guess really but here’s how I see it: they get paid 10% to do paperwork and 90% to ask questions. Seriously. Maybe the job title ought to have the word “detective” in there somewhere. They will ask you if you were the one who got that teaching degree that you “say” will be your source of income in the coming years. They will want to know why there was a sudden surge of cash deposits in your account (I guess saying you got a cash bonus from the boss lady may not sit too well with them). Your motivation to buy a new home will be questioned. I had one client living in a cold area and wanting to move to a warmer climate who was asked by the mortgage people what his motivation was for moving. He took a picture of his car’s thermometer showing sub-zero temperatures – and they accepted it! You might even be asked for DNA samples.
Ok, so I’m exaggerating a bit here, but you get the idea. The point is that mortgage consultants will review and comb through every little detail that they feel pertains to your ability (or inability) to pay off their loan. And they should! We don’t need more foreclosures bogging down our economy. Let them do all the detective work they need.
Lining Up Your Ducks In a Row Will Ensure You Win the Game
What can you do to head off some of the questions you may get asked? Easy – be prepared for anything and everything and have ample supporting documentation to corroborate what you are stating. Make sure you have all your paperwork ready, down payment funds secured and in one place, where they can easily be traced back to their original (and legitimate) source. Try to anticipate any idiosyncratic questions you may get from the lender, based on your application and/or circumstances. One particular area that causes a lot of grief for applicants of a mortgage is the unexpected outcome of an appraisal that yields a home value far less than the sellers or buyers anticipated. This is especially difficult during refinance application processes. By having a Comparative Market Analysis done in advance, for instance, you can remain on top of the game by knowing what to expect before it occurs.
A Few Important Things to Keep in Mind:
DON’T TAKE IT PERSONALLY – STAY REALISTIC
If you are asked for clarification on something that may seem obvious to you, relax and comply. The lender is looking to loan a huge sum of money and needs to be sure you are credit-worthy in every sense of the word. Be realistic of your expectations of the process.
BE READY TO SHOW STEADY EMPLOYMENT
Nowadays it is imperative to have at least two years of gainful employment demonstrating your ability to pay the mortgage on time and regularly but also the sustainability of your profession and job in particular. Huge variances in income over the course the past two years does not demonstrate the ability to consistently pay on a mortgage.
HAVE TWO YEARS OF TAX RETURNS ON HAND (W2s TOO)
You will need to show that Uncle Sam gets his cut each year – for at least two years. Tax returns are just another way to strengthen your case and support your income as reported on the mortgage application.
ESTABLISH A SOLID TRACK RECORD SHOWING PAST RESIDENCE
Lenders are increasingly finding it important to show a proven residence history where the buyer either rented for at least two years or lived in one location for that long. Someone in the military, for instance, may not be treated the same way as a regular citizen looking to establish long-term residence in a locale.
If you have large deposits that are unaccounted for – you will obviously raise flags. To keep things simple, be prepared to answer questions about your finances. Large balances on revolving credit should be explained if they occurred due to a particularly difficult financial time.
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Does the thought of all this make you nervous? Are you one of those potential homeowners ready for a mortgage but are scared of the fire you might have to walk on to get to the other side? If you feel you might be a complex case, or even if you just want the good doctor on your side of the table, contact the Mortgage Doctor for some insight on your financial and mortgage health.
Remember, there is nothing more solid and more empowering than buying and owning your own home and nothing more freeing than to be able to refinance and reduce your payments. I’m having fun by exaggerating the process but the point is that as long as you are prepared for whatever comes your way and you realize that it’s all just a process, most of you WILL come out on top and succeed.
