You’ve come a long way in your home search. First you commit to wanting a home, which is a great step. Next, you take the time to go to a banker and actually see what you can afford to buy. Your banker gives you the great news, and tells you that you are pre-approved for a mortgage. Sweet! Now what? Now you find that house!
The house hunting part is actually the fun part, and the one that I like the most here in Costa Mesa real estate. It’s fun to see what kind of home you can afford, and certainly fun to find the home that is just right for you. Once you have found that home, what are the things that can go wrong? Unfortunately, it is usually surrounding the mortgage that you are trying to get for yourself for the new house.
In the 200+ sales that I have overseen, these are the absolute top 5 reasons your bank will not approve your mortgage:
- Change in Employment – Don’t get a new job, and don’t get fired. That is the biggest challenge to anyone who is in escrow purchasing a property. If you change your status at work, the lender will probably find out because they will do an employment verification just days prior to funding the loan, and they will absolutely halt the process if things have changed. I’m not saying they will cancel the loan every time, but 9 times out of 10 they will stop their lending process.
- New Debts Incurred – Here’s your short list of don’ts: Don’t open or close any new credit cards. Don’t buy a car. Don’t apply for a new loan on other properties. In general, don’t do anything that might add a good bit of debt to what you have going on.
- Appraisal Problem – If you are putting less than 30% down, and the house does not appraise for the same or more than you are in contract for, you are probably going to have an appraisal problem. Your bank will only lend according to the appraisal. If you are putting down, say 20%, and the appraisal is significantly off value, the bank will not make up the difference. You will have to come out of pocket and add those extra dollars to the deal or have the seller reduce their price.
- Credit Issues – All lending is driven by your credit scores. Lenders have what they call “overlays” and the biggest one is credit scores. 720+ is considered excellent, 680+ is good, 660+ still gets you a good loan, and less than 660 puts you into a higher interest rate without question. Lower credit scores might also force you into an FHA loan, which also can come with mortgage insurance, an additional expense which you might not have been expecting. Even little credit dings can take you way down, so be sure that you or your lender checks your credit prior to getting that house.
- Loan Changes – The lender will sometimes change their policies and guidelines in the middle of yourhome buying process, and your personal lender would have to keep you up to date to see if you still would be pre-approved for a mortgage. Sometimes it can be self-inflicted: you might decide to jump into a different loan product which can and will delay the process and or remove you from being approved for a loan product. The lender always wins, it is not something you want to fool with, trust me.
- Inspection Problems – Okay, I gave you a bonus reason!! How does an inspection possibly effect your mortgage you ask? Well, if you happen to be getting an FHA loan or one with mortgage insurance, the lender can and will have a say about the results on an inspection. Especially if you are doing an FHA loan. The lender will look for any hazardous or dangerous conditions, and force the owners or you to make changes prior to them funding the loan. And that is a bonus for you, really, because you would want to fix the items they will call out anyway.
So keep it simple- follow that list of don’ts and don’t look back!
Go find the house and if you need help, connect with Colin at 714-743-9882 or email me.