The mortgage approval process is not always an easy one. There has always been a lot of required paperwork and research from the lender to approve the loan, but after the crash of the housing market it has grown even more. Lenders are working harder than ever to make sure they are minimizing their risk of loss on mortgages, which means you need to be prepared.
Here are 5 things to pay attention to so you can help move your mortgage approval process along.
Lenders need to see that you have the funds for your down payment sitting in your bank account and that it has been in your account for a minimum of 60 days. While this sounds easy enough, they will be carefully looking over your statements. If you have deposits made for over $500 they will want all of the details to verify where the funds came from.
If your account is straightforward it will be easy enough; however, if you are using your account for multiple purposes this can be incredibly time consuming. When you pull your bank statements to give to the lender get to work on obtaining the additional information that they will ask for.
If some of your income comes from rental properties that you own you will want to speak to your lender right away to see what their rules are. Some lenders will only allow you to use 70% of your rental income in your total, while others will allow slightly more. No lender will consider 100% of your rental income towards your loan.
Lenders will also want to see copies of your leases, rent checks, insurance and taxes. It will make it easier during your mortgage approval process if you do not allow rent to be paid in cash. Cash payments are harder for lenders to track and you risk the chance that they will not consider the full rent that you are receiving.
Lenders will want to look at two years of tax returns at the minimum for not only you personally, but any investment properties that you own. This can be a lot of paperwork, but the lender will require it and your application will not move forward without it. They will be looking at your net income on your returns and that is the number they will use to consider your loan. If you do not claim all or some of your rental income on your taxes it will not be used when the lender is considering you for loan approval.
The home appraisal can be a daunting process since the crash of the housing market. Appraisers will carefully scrutinize the property and you will not sway the value that they are calculating. Lenders order the appraisal, which means that you do not have control over the appraiser that is coming out to appraise the property. If you end up with an appraiser that is not familiar with the area you cannot be guaranteed that they will properly account for some of the benefits that a local appraiser might understand and account for.
New requirements to closing costs help protect buyers from being charged with unexpected fees at the last minute. Borrowers are provided with a detailed break down at least three days prior to closing. If there are any unexpected changes at the last minute it can delay the process for another three days. Borrowers are given time to understand what they are being charged for.
While the process can be time consuming to obtain a loan for real estate, each step is important for protecting the lender and the borrower. You can move the process along by being prepared with the documentation that the lender requires prior to them asking for it. Do your best to work along with your lender instead of against them and before you know it you will be closing on your loan.