Your Pre-Approval Matters. Seriously.
You do not have to search hard to find mortgage horror stories. Lost earnest money, broken moving arrangements and countless hours of wasted time; all because one piece of the home-buying process was half-heartedly completed – the pre-approval.
Sometimes the loan officer is at fault and other times the borrower fails to disclose deal denying information.
Set aside and focus on how to avoid costly issues that can often pop-up on a weak pre-approval.
Start Early & Have a Plan
The first and most important step is to create a household budget, which allows you to see how much money is coming in and how much is going out.
Your budget will help you determine how much mortgage payment you can really afford. However, the guidelines for loan approval may actually let you borrow more money than you can afford.
Having a good idea of what you are comfortable paying every month is important. Don’t be tempted to exceed your comfort zone amount just because you can.
No matter how minute you think a financial detail may be; disclose it regardless.
It is much easier for a savvy mortgage professional to fix a potential issue rather than fixing an actual in-process issue.
Proactively addressing a potential landmine upfront, whether it be with additional or alternate documentation or simply a thoughtful explanation letter, will save time and possibly even your deal.
Only Use a Loan Officer Who Asks for Full Documentation
While intentionally taking the more difficult and time consuming path may seem counterintuitive, I can assure you it is not. The documentation is the documentation and you will need to provide it at some point. Smart mortgage originators know that and will convey it.
You are not working harder to provide the additional documentation; you are front loading the inevitable. It’s better to document something 45 days before closing then to try and document it 4.5 hours before closing.
If you are issued a pre-approval without providing any documentation then you are working with a lazy loan officer. The 1/8th you saved on interest rate doesn’t mean much when you don’t have a loan. Be smart.
Start Planning 6+ Months in Advance
Start by pulling your tri-merge credit report. Checking your scores, but most importantly check for errors, especially collections and liens. Upwards 65% of all credit reports have at least 1 error.
By checking this early you can address any errors and address legitimate derogatory credit too.