When we work with first time buyers, we do everything possible to counsel them as to what to expect in the home loan process. Getting approved for a loan is one of the scariest, and most exciting, parts of the process to a first time buyer. Yet, in their haste to purchase a new home, many home buyers (not just the first timers) will open themselves up for scrutiny that will make the lender seem like Satan’s brother.
Credit Cards
One of the most basic pieces of advise, no new credit cards! Yes it is tempting to be offered six months same as cash when you are purchasing that new sofa, but it involves applying for credit and a new obligation. Most home buyers hate the idea of waiting to start shopping for furnishings but they really need to execute their mortgage before messing up their credit scores and debt load. In fact, first timers should probably take as many hand-me-downs as possible until they get comfortable with their new monthly payment. It is still rather easy to finance major purchases and before you know it, you will have so many payments that you will lose sleep at night!
Funds
If somebody is going to gift to you the down payment funds, get a gift letter from the lender to use and document the receipt of the funds correctly. Lenders will request 3-6 months of bank statements and when they see that large deposit of cash, they will want you to provide documentation. Make sure if you have a recent large one time deposit, you will apply toward a down payment, that you can document it. If it is not possible to explain (you found the money, you have gambling winnings, you stole the money) you will find this issue to be a big sticking point for your mortgage.
Many bank owned properties today are for sale to only owner occupants for a period of 15-30 days after first coming on the market. Unfortunately, we are seeing prospective buyers who are thinking they can sneak around these rules based on some technicality. Unfortunately, many are guided by uninformed, inexperienced agents. If you own another home, you will need to document that the one you are bidding for will be your home. Not that the other home you own is going to turn into a rental and you are now going to drive an extra 50 miles to work. Lenders are not that stupid. I have even seen cash buyers get caught up on this one based on the location of their employment. Better really be able to prove that you work remote and do not be surprised if the lender asks for a letter from your supervisor!
Not so long ago, lending standards were more lax and a lot of borrowers could say just about anything and not have to provide proof. We all have seen how that worked out and nobody is going to allow us to get back to those standards anytime soon. Be prepared for your lender, and don’t give them any reason to doubt you!
