The most important part of the home buying process is getting your funding squared away. Although investors are often aware of this fact, many are prone to making a number of highly preventable mistakes. Even a slight error during the application process can bring mortgage approvals to a grinding halt, resulting in missed deals or additional costs. Thinking of purchasing a house for sale in Irvine? Avoid the following four errors that could delay your mortgage approval.
1. Mistaking Pre-Approval for Approval
There are three financing terms that sound quite similar but mean distinctly different things: pre-qualification, pre-approval, and approval. Although each has a positive connotation, only one means you are actually approved for a home loan. Pre-qualification is a very informal affirmation based on the buyer’s general financial profile essentially saying he or she may be able to borrow an estimated sum of money. Pre-approval means that the borrower’s financial profile has been reviewed by the bank with positive feedback, but funding is not yet guaranteed. Conversely, an approval means that the borrower’s application has been submitted, reviewed, approved and passed on to the underwriter by the agent. An approval is the only one of the three that means funding is assured.
Given that pre-qualification carries absolutely no weight, many borrowers assume that pre-approvals are much more substantive. In reality, however, it is never a good idea to submit an offer on a home until the loan is approved and your file is in the underwriter’s hands. Remember, no matter how official a pre-approval certificate might seem, it is not official enough to back any offer that you make on a property of interest.
2. Failing to Supply All Necessary Documentation
The biggest and most common delays in the funding process are often caused by borrowers themselves. Failing to supply all of the requested information at the start of the application process can create major frustration further down the road. This is especially true when it comes to the submission of your financial documentation. You’ll need to supply:
- Tax returns and W-2s for two years
- One month of pay stubs
- Paper trails for all withdrawals and deposits of $1,000 or more, along with explanations
- A quote for home insurance that meets the lender’s requirements for coverage
- Year-to-date financial statements for your business (if you’re a private contractor or otherwise self-employed)
- Complete financial statements for any properties or companies that you own
Any documents that are not submitted will need to be presented to the loan agent before your application can be processed. Moreover, the lender will need to be authorized to verify your income with present and past employers if you earn commissions or have variable earnings. If new or conflicting details are discovered when your credit is run, these will have to be documented with in-depth explanations as well.
3. Failing to Be Forthright
Your loan application is going to be stringently reviewed by your lender. This means that any information you omit is guaranteed to come to light and it will also have a significant impact on how quickly your application is approved or denied. Thus, you have to make sure to provide each and every detail about your finances. You can submit info pertaining to your current and former residences, employment, assets and liabilities, and basic contact and personal information on paper or in-person.
4. Failing to Keep Your Lender Informed
You have to keep your lender in the loop at all times. Failing to write down important milestones could cause you to lose your initial deposit. You must indicate the date that the loan needs to be approved by and the number of days that it will take for the loan to close. This is something that your real estate agent is likely to manage, however, it doesn’t hurt to ensure that your lender and your agent remain in sync throughout the entirety of this process.
Working with an experienced agent who is familiar with all the ins and outs of the mortgage process can alleviate any worries or anxiety you have and will help ensure you’re on the right track. For more information on Irvine homes for sale or to speak with a friendly real estate agent at Irvine Residential Living, call (714) 454-6304 and take the first step towards purchasing your dream home.