Common Mistakes To Avoid When Applying for a Mortgage
Below is a list of some of the most common issues that arise when applying for a mortgage:
Taxes & Insurance – make sure to find out what the lender is using for taxes, insurance, and association dues when looking at properties to ensure accuracy. If they come in higher than what is being used the loan can be denied.
Seller Seasoning – Some lenders require that the Seller own the property for at least 90 days unless it was a bank disposition company. On an FHA loan if the property is being sold between 91-180 days for more than 100% of what the seller acquired it for a 2nd appraisal is required.
Condos – if the building’s delinquencies are over 15%, there is pending litigation, one investor owns more than 10% of the units, there is not enough Fidelity Bond Coverage, not enough in reserves, over 50% of the units are investment properties, etc., it may make the condo ineligible for financing.
PUDs – if the property is located in a PUD ( planned urban development) lenders may require a copy of the master insurance policy with $1 million in coverage.
Kitchens – most lenders want the kitchen to contain kitchen cabinets and a sink. The underwriter will look to see if the borrower has sufficient assets to purchase the appliances needed and if they don’t the underwriter may require them to exist in advance of closing.
Deposits – Lenders need to prove where any and all deposits came from so if your deposit is presented in cash and you cannot document where it came from…don’t use it. For the most part if it is Â not from your compensation, a gift from a relative, or a transfer from another account you have, don’t apply for a loan.
Declining Income – Lenders tend to income average commissions, overtime pay, bonuses, and self-employment income over 2-3 years. However if your most recent tax return shows declining income from the previous year then the lender will qualify you based on the lesser of the two.Â
Paystubs – if there are payroll deductions that are not reflected on the credit report it could create another reduction in income.
Credit – don’t pay off, pay down, take on new debt, or do anything with your credit unless speaking first with your mortgage professional.
Lastly, the 4 C’s are always needed – Credit, Cash (Assets), Capacity (Income, & Collateral (the property). You cannot have one without the other. The borrower must qualify with the first 3 C’s and the property must qualify too.