Buying a home is a big deal and so is getting a mortgage. Unfortunately, with so many parties involved giving you conflicting information, no wonder you feel stuck! And, the tricky part is that, unless you are aware of all the common pitfalls, you could end up missing out on a great rate or – worse yet – even lose your deposit.
Here are the five common mistakes that could potentially cost you your mortgage.
Failing to Provide Every Single Piece of Documentation
Paperwork is tedious but – vital. Gather detailed documentation for your entire profile, including:
- Two years of tax returns and W-2s
- 30 days of pay stubs
- A home insurance quote with adequate coverage
- Two months of statements for all asset accounts
- Explanations and paper trails of all deposits (and often withdrawals) above $1,000
- If you’re self-employed, provide year-to-date business financial statements
- Full financials on any other homes or businesses you own
In case your income is commissioned or variable in any way, authorize your lender to verify income directly with past and current employers. Your lender will run your credit and request new documentation in the light of further information revealed (if any.)
Excluding Details of Your Financial Profile
You’ll know you’ve got a right mortgage lender if they start the process by reviewing your necessary personal and contact information, residence and employment, assets, income, and debts. While this sounds simple, you may be asked to answer additional questions, whether on a form or in person. If you fail to disclose relevant information of your financial profile, the entire loan process slows down.
Not Sharing Home Offer Details with the Lender
The purchase contract is critical in dictating transaction timing milestones, and this is where your real estate agent will start, too. However, to avoid any misunderstandings, make sure your agent and lender are in sync on all the dates and conditions because otherwise, the lender won’t have enough information. It is a grave matter because you risk losing your initial deposit on the home if you miss either of these dates in your contract.
Confusing Approval with Pre-Approval
Misinterpreting approval status can take years off your life and, eventually, kills deals. Before you write any offer to buy a home; get your loan approved by an underwriter.
When your mortgage gets a “pre-approved” status, it merely means you’ve talked to a lender, and the documents you’ve shown are fine. However, this IS NOT a loan approval.
Ask to get “underwriting approved” and get a formal loan commitment in writing. And, remember: until your loan agent submits your file to an underwriter, your actual loan approval doesn’t officially begin.
Being Uninformed/Unrealistic About Rates
Once a seller accepts your offer, you’re in contract to buy your home and lock a rate for your mortgage. A rate lock runs with a borrower and a property which is why it is impossible for you to secure an interest rate before you’re in contract. Furthermore, until you agree to a deal – you also become subject to rate market movement with the rates changing daily.
Since you are looking to invest money in real estate, the best thing to do is talk to your mortgage lender and follow the advice laid out above. Good luck!
If you’re looking to buy or sell in Southern CA, let’s talk.