You may have already read all the nice and polite articles about what to do and not to do when getting a mortgage. And many of them may have had real cute titles. Well, this article is to get your attention on things that could MURDER your loan approval. Here is a list of 10 items that could cause your loan to be denied. These are all things to think of before making an offer on a home, as you could lose your dream home over them. Here they are
Opening new credit- Once you are pre-approved for a mortgage do not open or apply for any new credit accounts. The reason for this is that right before closing a new credit report could be pulled to see if any new accounts have been opened. So just because your lender says you are pre-approved or even approved, this does not mean run out and buy new furniture. And also do not charge more to your credit cards as credit card balances and payments are also checked with this new credit report.
Unreimbursed Employee Expenses- “Hey I don’t have a business so this part doesn’t affect me”. WRONG! When an underwriter calculates your income they look for any write offs you have under “Unreimbursed Employee Expenses”. If you are paid comission or even paid a 1099, this amount is then deducted from your income. Allowing you less income to use for qualifying. And this deduction from your income may not be caught until your file goes into underwriting depending on the thoroughness of your mortgage lender. Many of us may not even know we are writing off expenses like this that can be deducted from our income when qualifying for a mortgage. So to check your own tax returns for these expenses, you can look under Schedule A Line 21
CASH- You cannot use cash for your down payment. So if you are saving your down payment in your mattress, cookie car or freezer, stop it is a bad idea. The reason why cash cannot be used is because for a mortgage you have to document where all large deposits come from. And you can’t really document where cash came from. If you have cash now, deposit it into a bank account. Then once you have 2mths of bank statements after the deposit and they do not show the deposit, you will be okay to use that money since the large deposit is not shown on those statements.
Money you cannot document- Just like in #3, you have to document all large deposits into your bank accounts. The definition of a large deposit is really determined by the underwriter. But let’s say $500 and up, thou some may require it for smaller amounts. So if you sold a car, baseball card, comic book or one valuable Beanie Baby you have to document it. You will want to do this by getting a bill of sale, copy of check (don’t take cash, see #3), and title if it is a vehicle.
Not Having Your Down Payment- I can’t tell you how many times I have heard “My parent’s will give me whatever I need”, “I’m going to get a bonus in a month”, etc. Then the amount of money they are expecting ends up being less or none at all, causing them to not have the money they need for closing. So to be safe, make sure you have your money needed for closing before you make an offer on a home!
Business Income- If you own your own business, what you bring home and what you document as income on your taxes always differ. There are write offs, expenses, depreciation, etc. Before you make an offer make sure your mortgage lender has reviewed your tax returns. You NEVER want to get a pre-approval for a mortgage based on the amount of income you take home, as this most likely is not your true income.
Rental Income- Just like #6, what you bring in for rent is not what you show as your true rental income. So again when getting pre-approved and you own a rental property/properties make sure your mortgage lender has reviewed your tax returns to calculate the true rental income.
Changing or Quitting your Job- Changing your job during the home buying process is a HORRIBLE idea. The short answer is don’t do it. It does not matter if the new job pays you more, less hours, better title, etc. As all loans require a certain amount of time on your job and switching jobs during the process will most likely cause your loan to be denied. Until you are on the new job for the required time. And just because your loan is approved does not mean you want to go and quit your job either.
Be Honest- If during the loan process you are thinking “that is none of my Loan Officer’s business”, most likely it is their business and something you should tell them. Some items that fall under this list are: other real estate properties, child support, owed taxes to the IRS, etc.
NSF’s- NSF’s stands for Non Sufficient Funds. NSF’s are when you overdraft money from your bank account. Mortgage Underwriters look down on these as it shows you are not very good with your money. And the underwriter’s job is to decide if you are someone who will pay their mortgage payment on time, etc. Having one NSF is not the end of the world, but having them often could cause your loan to be denied.
If you have read this far into the article then it is safe to say the title got your attention. And many of these topics may have scared you into now being more educated on the topic of items that may cause your Mortgage Approval to be MURDERED! But do not worry if you are educated on this topic and work with the right mortgage lender, you will be fine when it comes time to close on your dream home!
Comments(2)