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One reason why Amansad Financial Services, Inc. opened its doors was to help borrowers who have the means to take on a mortgage or some other form of financing but cannot successfully negotiate the thicket of government regulations. We have encountered many borrowers over the years who have damaged their own applications through a series of errors (some intentional, some otherwise) that made a loan insupportable on the basis of the information they provided. Take a look at seven common mistakes to avoid as you put together your loan application.
1. Providing shoddy paperwork
The lending market is a competitive one, and lenders want to move through applications quickly – while also making sure that they check all the regulatory boxes. With this in mind, you want to present your paperwork in a format that is as clear and orderly as possible. The way your lender takes in documentation may vary, but most use one or more of the following: uploading online, email, business text lines and fax lines. When you send in paperwork that is incomplete, that wastes the lender’s time. If your credit score and income make your application marginal and the lender has to keep coming back to you to complete forms the right way, you’re heading toward a rejection.
2. Leaving out or falsifying application information
It’s tempting sometimes to put false and/or fabricated information on a loan application form so that you can get a better interest rate – or even move from rejection to approval. Some of the more common tricks people try include saying that they have worked at their job for longer than they have and saying that they have more money in their savings accounts than they actually do. Lenders will require verification of this, and the underwriters can tell when they are receiving suspicious information. If your application seems like something is off with it, the due diligence either increases significantly, slowing your closing date, or stops as the lender just decides to move to the next application.
3. Failing to explain all of your debts
Check your credit report from all the bureaus before you submit your application to make sure that the debts that appear there are accurate ones. When debts show up on your credit report that don’t seem quite right, either because of their relative size compared to your income, or because they are jointly held with people you haven’t mentioned in any of your other paperwork, then your lender could take a dim view, particularly if you can’t provide a clear explanation after they ask. For a private lender, they may still proceed but with unfavorable modified terms.
4. Letting your property sink into disrepair
If you’re trying to get a new loan on an existing property, or if you want to transfer your mortgage to a new lender upon renewal, it’s important to keep everything looking solid. If your house is a dump, the appraiser (and the lender who ordered the appraisal) could take a negative view of how you run the other areas of your life. Your home is generally a reflection of your life.
5. Failing to keep in contact throughout the process
Remember – your loan request is one of many making its way through the paperwork tunnel for your potential lender. When the lending staff reaches out with questions, you should answer them in a timely manner so that they can keep you in their good graces. If you never answer the phone or respond to email requests within a few hours, you will start to become a problem in the eyes of the lender, and if some real cracks start to show up in your application, you will be one of the first ones dropped.
6. Failing to provide adequate documentation
Lenders have a specific list of initial documentation that they need before they approve a loan. If you don’t provide it up front, and if you refuse to do so when they ask for it down the road, your lender will rightly take a step back from your application. You might be trying to pull of fraud, in the first place, but in the second place, the list of documentation needed is not a secret – most lenders have it posted on their website. If you want smooth approval, then give the lender what they need.
7. Turning wishy-washy at the last minute
You shouldn’t jump into the house-buying game until you’re sure that your budget is ready – not just for mortgage payments, but insurance, utilities and saving just in case repairs become necessary. It’s one thing to bail during the option period, but once you’re heading toward closing of your loan, it’s time to sign on the dotted line unless your circumstances change significantly. Otherwise, going back to the same lender can lead to terms that are less favorable; depending on whether dealing with a traditional, semi-traditional or a private lender.