Take time to complete the application
Get a comfortable table or desk and spend the time to fill out your mortgage application neatly and correctly. This is not the time to be multitasking.
If you are given a paper application at the bank or credit union, ask to bring it home and complete the application when are you not pressured, and have all of your documents handy. If you are doing it online, use extra caution, watching out for mistypes, misspellings and make sure that you put the correct info into the correct form fields.
One way to smoothly go through the mortgage application process is to create your own application package approximately one year and no later than six months prior to applying for a home loan. Gather all of your information, check your credit report and that way you can be aware of any surprises before you speak to a lender. Here are some of the things you should prepare during this period:
List of debts
Make sure you know exactly how much you owe and to whom the money is owed. If you are married or you are purchasing the home with a partner, help of a parent or some other second party, everyone should be aware of the total sum of all individual and joint debts.
Gather your documents for auto loans, school loans, personal loans, other mortgage payments, alimony payments, child support payments, credit cards and any other type outstanding debt. Create a master list with all of the items, account numbers, addresses, amounts owned, interest rates and monthly payments.
If you can pay off a significant portion of any one medium to large debt perhaps you should consider waiting an additional year before applying for the loan.
If you have moved recently or have been upwardly mobile for a while, it can be difficult to remember all the addresses, apartment numbers and cities where you lived. Your address history should also be on your credit report, but you need something else such as old statements or information from your address book to make sure that your credit report is accurate.
Get a copy of your credit report from all three credit bureaus. Check the information from each report against your records and also against each other. Sometimes when an outstanding debt has been paid or settled, the information might be sent to only one bureau or not at all. Call your lender and ask if and when they information will be provided to the credit bureau.
Then, follow up with the credit bureaus to make sure the information has been added to your file. What type of information are you looking for: social security numbers, addresses, dates on accounts, opened accounts, closed accounts, outstanding debts, negative information that is incomplete or inaccurate.
List of assets
Frankly, how much are you worth? Do you have any stocks, bonds, savings accounts, retirement plans or own another home? Again, create a master list with the items, account numbers, worth or potential worth if liquidated and addresses or contact information.
If you are planning to sell any type of asset to use the money as down payment, try to complete the sale at least six months prior to filing out your mortgage application. Mortgage lenders always want to see that you have the money on hand for all of the costs associated with getting a mortgage. They generally look down on last minute buying and selling to come up with your cash. They want a snapshot of your current financial situation going back at least six months.
If you are getting alimony or child support payments and want this to be included in the calculations prepare the documentation to show how much money are you receiving and projections for how much you think you’ll receive in the future.
Bankruptcies and foreclosures
Your lender will be able to find out just about everything they want about your financial history so don’t’ try to hide foreclosures and bankruptcies. Just make sure the information is accurate. Gather all of your paperwork including dates, settlements or outstanding balances at the time the debt was discharged and keep it handy.
Collect W-2 forms for the last 2 to 3 years that show your employment history and income. As with your payment habits, try not to make any sudden job changes within the 6 months to 1 year period prior to applying for the loan. Income changes are especially suspect. If you experience a sudden dramatic increase or decrease in income be prepared to provide a full verbal or written explanation along with your paperwork.
Remember that the purpose of all this data collection is make sure that you have the most accurate and update picture of your financial history to make the mortgage application process smooth and easy.