Buying a home can be difficult. That’s one reason there are so many professionals responsible for helping you through the process -- realtors, loan officers, insurance agents, home inspectors, appraisers and title attorneys.
Unless you pay cash for your new home, the first challenge of the home buying process is obtaining financing. There are lots of great mortgage lenders serving our area. But even the best mortgage company can’t guarantee your transaction will not hit snags.
Home buyers must take responsibility for certain tasks when applying for a mortgage. There are also certain things home buyers should not do.
Here are six common financing-related problems to guard against when seeking a mortgage to pay for your new home.
1. Failing to be truthful when completing the loan application. Exaggerating and providing false information on a mortgage application is a crime that can have severe consequences.
2. Making a large purchase with credit before your home purchase closes. Once you’ve applied for a mortgage and while you’re waiting for the loan to close, don’t make any significant purchases without first talking with your loan officer. Such purchases can alter your “debt-to-income ratio,” which in turn may disqualify you for a loan.
3. Failing to locate important documents such as divorce decrees, bank statements and tax returns. Key documents are needed to establish your eligibility for a mortgage. Given the role lax paperwork practices played in the recent housing crash, lenders have no flexibility when it comes to complying with documentation standards.
4. Failing to obtain sufficient funds to bring to closing. At the beginning of the loan process, your loan officer will give you a good estimate of what funds, if any, you must bring to the closing table to complete the transaction. If you expect problems raising this amount, contact the loan officer as soon as possible.
5. Failing to adequately document a “paper trail” for money coming from gifts, loans, etc. Again, lenders are responsible for conducting a precise analysis of your financial picture. They must verify that you are financially capable of buying your chosen property and that your purchase funds are not fraudulently obtained.
6. Dragging your feet while the loan’s interest rate increases. After years of low mortgage rates, rates appear to have bottomed and are beginning to head back up. Several of my buyer clients have seen their quoted interest rates rise one quarter- and even a half-percent, and those who waited to lock in the low rates have lost some of their buying power as a result.
In conclusion, a good loan officer will meet with you at the beginning of the process, explain your role and advise you on the things you should and should not do to ensure your purchase will close on time. Following those instructions carefully and quickly responding to the loan officer’s requests will make your home purchase proceed much more smoothly.
Jerry Kline is a Realtor with the Odenton, Md., office of Keller Williams Flagship Realty (1216 Annapolis Rd., Odenton.) For more information on the local real estate market, contact him at (443) 924-7418, or visit his blog (www.JerryKlineRealtor.wordpress.com) or website (www.JerryKline.kwrealty.com).