Avoiding red flags during the mortgage approval process

Want to increase your chances of getting approved?  Here are some tips on what you should, and should not do during the home loan approval process.

Do keep up your credit rating

It’s best to assume that your lender will pull your credit score while your loan is being approved. It’s important to nurture your credit score prior to sending in your application, but your work isn’t done until after closing.

Don’t make any big changes

While your loan is being reviewed is not the time to take out new credit nor to close the credit accounts you already have. Don’t make any major purchases. Don’t max out any of your credit cards. Hold off on any type of debt consolidation until after your loan has been approved.

Do keep your job

Don’t quit your job unless you have a better one lined up to start immediately. This includes making the decision to become self-employed or to become a 1099 contractor. Lenders prefer steady, traditional employment and leaving the job listed on your application can be a red flag for underwriters.

Do keep all your documents in order

You never know when the underwriter is going to request additional documentation in order to approve your loan. Gather all related paperwork ahead of time so that you’re ready to go should you need to provide more details. Common examples include:

• New paystubs
• Tax returns and other proof of income
• New bank statements
• Gift letters to accompany any large gifts you’ve received from relatives
• A HUD-1 settlement statement from the sale of your current home

It’s important to remember that the loan approval process is constantly changing, so underwriters are sometimes required to ask for documents that you may feel are over the top or unnecessary.

Do save your money

Don’t presume that you’ll be able to roll all of your closing costs into your new mortgage or that the closing amount will be exactly as estimated. Keep cash reserves on hand to cover unexpected costs.

Don’t make large undocumented cash deposits

Large cash deposits into your accounts with no paper trail can be a red flag to lenders. They may appear to be short-term loans from friends or family members meant to temporarily boost your financial position.

Do call your mortgage broker with questions

Take the guesswork out of getting your home loan approved by calling the experienced mortgage professional whose job it is to look out for your best interests.

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