Your mortgage application: Get it right the first time
Useful tips for a clean loan file, from those who know best.
For many people, buying a new home or refinancing is the most complex financial transaction they’ll ever make. With the amount of information and documentation required to complete a loan application, chances are some things will be missed or forgotten the first time around. Omitting important information or partially filling out a form are common mistakes people make at the beginning of the mortgage process. And though these hiccups may not be deal breakers for getting the rate and product they want, it’ll slow down the process, costing time and possibly money.
We consulted a few mortgage experts at Guaranteed Rate to get their insights into why home loan applications might not pass muster, and what homebuyers can do to avoid these early mistakes and speed up the process.
Report accurate income.
Knowing what income can actually be used on the application is a recurring issue. This can be a huge source of misunderstanding for homebuyers. For many programs, we can only use base income if we have a two-year history of bonuses and commissions. Any additional income that they may receive—alimony, child support, tips, etc.—cannot be used if it isn’t reported on the previous two years of tax returns. We see this a lot, where the applicant will state they earn $15,000 a month but we can only use $6000 of it.
—Joann B., Mortgage Consultant
Tell your loan officer everything.
Well, maybe not everything. When it comes to their loan application, though, it’s always in the best interest of the homebuyer to let us know their complete situation so we can put them in the right loan product. Even if they don’t think some info is relevant, the loan officer (LO) needs to know about their income, assets and debt. Now, we may not need to know about every asset or require documentation. Some borrowers qualify with just the funds in their bank accounts, so it may not be necessary to dive into all the assets they have. It just depends on the situation. But not all of the responsibility is on the borrower; I’ve always been of the mindset that it is the LO’s responsibility to expand upon what is asked in the application. The Digital Mortgage is a very helpful tool. It’s definitely a time saver with a lot of the yes/no questions and data input. The hang ups I usually see are when loan officers take what they see in an online application and run with it. Delays happen when we don’t have all of the necessary information up front and have to backtrack.
—Tom W., Senior Loan Officer
Don’t try to hide debt.
Buying a new home without disclosing debts or debt history is next to impossible. I get it; people are uncomfortable reporting certain things, but we’re not here to judge. We just want to help them buy a new home and make it as easy and fast as possible. Whether it’s tax liens, a judgement against you, bankruptcy, whatever—all debts and negative financial impacts need to be reported. Believe me, we’ll find them eventually, so for the sake of time it’s best to get it all out there from the start.
—Joann B., Mortgage Consultant
Pay attention to detail.
My advice for homebuyers: when asked for bank statements and tax returns, each side of every page must be submitted. It may be apparent that only the first few pages of a given statement have the information we need, but we have to verify all information, not just that which the borrower deems relevant. Page 9 might even be blank, but because it is referenced in the previous pages on the statement (Page 7 of 9; Page 8 of 9, etc.), we will need to see it before we can send the application to underwriting for approval. And when the two most recent statements are requested, one from July and one from February won’t cut it. Attention to detail is especially important for homebuyers who are self-employed or own investment properties. They will need more documentation than those with W-2s, so it’s important for them to ask their LOs for a complete application checklist at the outset.
—Shane J., Consultant Vice President