It’s easy to get caught up in the elation of purchasing a new house, especially if it’s your first time as a homeowner. That sense of accomplishment, the upgrades to your lifestyle and living arrangements, even landing a sweet interest rate on your mortgage payments, are all part of the ups that come with having a home to call your very own.
With all of these things to look forward to, it’s understandable to want to swiftly move through a mortgage application as fast as possible. Many times, though, potential homeowners may not realize some of the little things they inadvertently do in a hurry that can actually slow down the mortgage application process to the detriment of being approved for a home loan.
Before applying for a mortgage, consider some of these common missteps and avoidable oversights that could prolong the application review, and even get you declined by a lender.
Avoiding Mortgage Application Mistakes
#1. Failing to get pre-approval
Colin Robertson of online publication U.S. News & World Report says it best: “Good preparation is the key to a good mortgage.” Unfortunately, one of the most fundamental preparatory steps people fail to take is getting pre-approved to check if they even qualify for mortgage financing. According to Robertson, mortgage loan pre-approval is more conclusive than a basic pre-qualification, because a bank will examine everything from your credit report, to your income and assets.
Lew Sichelman of Realtor.com also says that many consumers confuse pre-qualification with pre-approval. In the case of the former, a lender is only making a guesstimate into how much for a mortgage loan you may be allowed to borrow; in the latter, you’ve been approved based on the facts of your financial history — what you can afford comes down to hard numbers, not estimates. Overlook these differences and you may need to start the application process from square one.
#2. Changing your credit behavior
Indirectly shifting around your credit, like opening or closing a credit card, can also hurt both your FICO score and mortgage application because it skews your credit utilization ratio. The same goes for simply applying for new credit along with your mortgage application.
#3. Blanking out on the “blank pages”
It’s an admirable thing, wanting to save paper and conserve trees and all. But when those empty pages of your mortgage application say “These pages left intentionally blank,” they’re blank for a reason. That doesn’t mean you can skip over them when scanning, faxing or mailing them to a lender, bank or credit union. This simple omission can invalidate your application entirely, or, at the least, hold up the process.
#4. Forgetting to read the “fine print”
Be careful what you wish for. Overlooking the finer details of a mortgage application could mean you may get OK’d for a mortgage you really don’t want. Being hasty about applying for a sub-par mortgage deal is just a waste of time for you and your lender, leaving you to begin the process over again.
The same can be said about verbal agreements. Your word may be your bond, and a lender’s word may be their bond, but nothing is official until it’s in writing. Gone are the days when a handshake and a promise meant a deal was official. Failing to fill out mortgage documentation means there’s no fine print to read, and could indicate a scam, above anything else.
There was a time was when you could embellish little things like income, employment or credit score on a mortgage application. No biggie, right? Wrong — in these post-financial crisis days, banks, lenders, and most important, the law, leave no stone unturned when it comes to anything financial, right down to the errant typo.
Any information you put down on a mortgage application — from 401(k)s to IRAs, to outstanding debts, even bankruptcy filings — can all be verified right down to the decimal point. Don’t put yourself at risk of committing mortgage fraud. And never, ever lie about your taxes.
Sichelman adds never to sign an incomplete mortgage application, either. Loan officers have been known to “fill in” missing information — if it’s erroneous or false, guess who’ll get the blame by the authorities? You.
#6. Leaving out the legwork
Applying for a mortgage is a chance to verify some of those personal details we’ve never been sure of. Don’t know if your credit score is 320 or 780? Check out your credit before taking out a mortgage. Forgotten some of your past employment history? Or, haven’t tallied up the exact amount of your outstanding debt? Dig into your records to get the answers. It’ll not only save you and your loan officer the work, but you’ll have the personal satisfaction of acquainting yourself with your own personal finances.
Mortgage Approval: Before and After
Following this mortgage application checklist can improve your chances of getting approved more quickly at low mortgage rates today. But the application is just one step in a multifaceted process. Got mortgage questions? Don’t hesitate to sit down with a loan officer, banker, or a real estate lawyer to learn the ins and outs of mortgages before you apply.
And remember, if you’ve been approved for a mortgage, secured your terms, and moved in, the paper trail doesn’t end there, even when you’ve finished paying off your mortgage.
Sichelman says that many people hold “mortgage burning parties,” setting fire to their original mortgage loan document. He wisely advises not to. Make copies of everything related to your house, and store them in a safe location. Your house and everything associated with it is an asset — letting them go up in smoke could mean lessening your chances of selling your home, or getting approved for a future mortgage.