12 Things Your Buyers Should Avoid When Applying for a Mortgage
If you’re a real estate agent, you know the job doesn’t end with an open house or even a purchase agreement — it ends with you delivering the keys to a happy homeowner. Whether they’re purchasing their fourth investment property or becoming home owners for the first time, they’re counting on your expertise to guide them through the process.
Along with helping your client find the property that meets their needs, they’ll likely turn to you for help securing a mortgage. That’s why you’ll want to explore partnering with a mortgage broker.
Why use a mortgage broker? Partnering with an independent mortgage broker makes the funding stage easy, as they will shop multiple lenders to find pre-approvals and home loan options based on your client’s financial needs. Moreover, you can work in concert with your broker partner to help your buyer progress from the loan application to clearing conditions and a seamless closing.
To prep your buyers for this important financial investment, use this mortgage loan checklist. It will ensure your buyers have all the info they need to put their best financial foot forward before signing on the dotted line.
1. Making major purchases such as furniture, appliances, jewelry, vehicles, or vacations. Mortgage lenders want to ensure your buyer will be able to repay the money they intend to loan. Major purchases are likely to change their monthly debt-to-income ratio, which will affect their loan options. It’s best to hold off until after the closing is complete.
2. Changing or quitting a job. Mortgage lenders are in the business of lending, but they need to minimize risk as well. They will require a job history report that spans the previous 24 months — showing a stable occupation and income will have a positive impact on approval odds.
3. Withdrawing, depositing, or moving large amounts of money in or out of bank accounts. They may only be moving their money for convenience reasons, but any unexpected activity within accounts can raise a red flag for an underwriter and bring the process to a halt.
4. Paying off debts or collections (unless told to do so by your mortgage broker). As the mortgage lender combs through your buyer’s financial history during the application process, they may be alarmed by any new events. Consult with your mortgage broker partner first to prevent unnecessary hassles.
5. Using cash for an earnest money deposit — cash is difficult to verify and could result in a closing delay. The earnest money deposit will eventually become a part of your down payment, and any money that can’t be verified will be removed from the deal.
6. Pulling the buyer’s credit report too many times — this can hurt their credit score. Any damage done to your client’s credit can negatively affect their mortgage options, so it’s wise to keep credit inquires to a minimum.
7. Missing car, credit card, student loan, and other debt payments. Late payments may be seen as an inability to manage money and can result in application denial. Your buyer’s credit history should inspire trust and missing payments does the opposite.
8. Co-signing on a loan, which makes them partially responsible for that debt. Even as a co-signer, the new debt will affect your buyer’s credit score and debt-to-income ratio. Those factors play a large role in their approval odds, as well as the rate and term of their loan.
9. Receiving a pre-approval letter with too high of an amount. Home sellers and agents don’t need to know your client’s max budget. Your client will want to give the seller a preapproval letter that matches their offer. Nothing more, nothing less.
10. Not saving enough for a down payment or borrowing money for the down payment. Along with your buyers’ down payment, there may also be closing costs and additional fees to consider. Real estate agents and brokers can work together to ensure all costs are accounted for so your clients can budget accordingly.
11. Having business debt under your name. If you personally guarantee a business account in any way you act as a co-signer, which means your business debts can affect your credit.
12. Not establishing a solid credit history. Mortgage lenders use your credit history to help assess your ability and willingness to repay debts. The less credit history you have to show, the larger the risk in approving your home loan.