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When applying for a mortgage, it’s important you understand ahead of time what a lender looks for when approving a mortgage application. Doing your homework upfront will save you a lot of stress and worry. Once you understand what not to do, then you will have a great chance of getting pre-approved for a mortgage. I have seen thousands of applications and heard all the stories, but these are the top 2 things that will most likely get your application denied.
Check Your Credit Before Applying For A Mortgage
We all have the option to check our credit for free at www.annualcreditreport.com . There is no reason to have no idea what is reporting on your credit report, before applying for a mortgage. Most people know they have had some late payments or accounts that went into collections. What’s important is to know exactly how these negative accounts are reporting to the 3 major credit bureaus. For example, if the negative activity on an account is recent, within the last 12 months, this will affect your score more than something that was 3 year ago. Even if you are the kind of person that makes sure your payment on made on time every time, never runs up high balances on your credit cards, or doesn’t open too many lines of credit, you need to check your credit once a year.
The most common negative account I see is a medical bill that somehow wasn’t paid, (or never invoiced from the hospital, after the insurance company didn’t cover the expense) end up going months without payment and then the hospital sends the account to a collection agency. The collection account ends up reporting to your credit report and then that is when some find out they still had a small outstanding balance of $50. Don’t let something like this report to your credit for years, when you could correct the mistake ahead of time.
Please take the time to call a mortgage professional to check your credit ahead of time or do it yourself. It’s better to have a mortgage person do this, so they can go over it with you. They will help you with understanding what is reporting and if anything negative is reporting, what to do to correct it as soon as possible. Prevention is better than cure.
Not Supplying All Information For A Pre-Approval
When you apply for a mortgage pre-approval, you need to make sure you supply all the information about your situation. Please don’t stretch the truth or try to hide something from your mortgage person. We are hear to listen to your complete and honest situation, so we can help you with placing your situation with the right lender and getting you pre-approved. We are on your side working for you, not against you.
Take the time to supply all the documentation needed for your income, liquid assets and any other unusual situation you have had in the past. If you had a divorce in the past, please make sure you provide your divorce decree, regardless how long ago the divorce was. If you had a bankruptcy in the past, please provide the all the paperwork involved in the bankruptcy and discharge documentation.
Real World Example:
A client had child support payment from a divorce in the past. He told us what his monthly support payment was, but after looking over his divorce decree, the agreement stated there was an additional payment he had to make to his ex-wife. He told me this was just for the child’s standard costs, like clothes, food, etc. and most divorced parents have this agreement for their child. Well, the ex-spouse wanted this stated in the divorce decree, so this makes it an additional debt counted against him for his mortgage pre-approval. If a court order states you have to pay a certain amount, we have to use that monthly amount against you in your total debts. If it was just a verbal agreement between the two parents, we would not have to count this against him.
The more information we know upfront , the less likely you will have to worry about your mortgage application getting denied. Our job as a mortgage professional is to understand your entire situation, so we know what lenders will accept or not accept your situation. This will lead to a smoother process and very little chance of denial.