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Before You Apply For Your Mortgage Loan

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If you are concerned about your ability to qualify for a mortgage, before you get pre-qualified or pre-approved, it’s a good idea to add a few steps to your home loan prep checklist.

These steps should be in addition to the usual things you need to do before you apply for the loan, seel pre-approval, approach a seller, or even start working with a real estate agent.

One of those things is very important–you need to not only know the contents of your credit report (a Home Loans 101 type piece of advice) but also monitor your credit through the entire planning and purchase process of your home loan.

Knowing your credit score is vital for a mortgage borrower and home buyer, but what happens if your credit report begins showing signs of identity theft along the way or errors crop up in your report since you last checked it?

Your last hard inquiry into your credit may have fallen off your report depending on when it was last checked, but what about other information that should have fallen off a long time ago?

Are you still seeing old credit cards listed? Monitor your credit report for these outdated information issues as well as identity theft and other problems.

When you are planning your loan, thinking about choosing a mortgage lender and getting your down payment saved up, one important thing to remember is that when saving for that down payment you should keep careful records of the funds, their sources, and when you deposited them.

Your lender will need proof that those down payment funds did not come from unapproved sources including the home seller, non-collateralized loans, payday loans, etc.

One thing you’ll find crucial–avoid large, unexplained deposits into the account that you are saving your down payment funds in.

What else do you need to be thinking about long before you start worrying about the mortgage approval process? In addition to gathering your pay stubs and other important financial information, be sure to include documentation of any assets you might have that could factor into your financial bottom line.

Do you have a large cash reserve that might be useful as a compensating factor? What about investments you might be thinking of cashing in to come up with closing costs or down payment funds?

Your bank statements and other financial instruments are not the only things your lender may require depending on circumstances. If you have switched from salary to commission income, or have gone from being a contractor to an employee, you’ll want to save the documentation that shows how and when these things happened.

In some cases, your lender may need that information to sign off on your loan amount, issue approval letters, etc.

Some borrowers are surprised to learn that tax returns and (in the case of small business owners) profit-and-loss statements where applicable are also required as part of the mortgage loans approval process.

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