CHECKLIST OF DOCUMENTS NEEDED
DO’S & DON’TS DURING THE LOAN PROCESS

HOW TO PREPARE:

The process is actually quite simple and is essentially the same if you are buying a $150,000 condo or a three million dollar home. First, what should you do to prepare once you have decided you want to purchase a home:

1. Get PRE-APPROVED by an experienced mortgage professional that specializes in mortgage planning. Starting off by calling the lowest rate advertisement you see in the paper is not the smartest thing to do. An experienced mortgage planner will ask all the right questions to not only insure you are qualified to buy a home, but to make sure that you use the appropriate mortgage to achieve your goals. Once he or she has done that, they can most probably refer you to a very experienced Realtor who will then be able to show you property for which you are qualified to purchase. Many individuals go out and find the home of their dreams, based on some generic “pre qualification”, get into contract, and then find out that they either can not qualify for the loan or that when they are truly “qualified”, the payment is outside their desired range and the financing does not meet their long term goals.

2. Prior to meeting with your mortgage planner you will want to gather the following documents:

a. Copies of your most recent pay stubs
b. Copies of your W-2 for the previous two years
c. Copies of your most recent asset statements (checking, savings, etc)
d. Copies of your most recent tax return including all schedules, especially if you are self employed or have rental property
e. Copy of your divorce decree if you are obligated to pay alimony or child support
f. If you receive income from some other source, i.e. Social Security, Pension, etc., bring an award letter or whatever documentation that outlines your income from that source

With this information your mortgage planner will be able to give you the exact terms under which you are qualified. If you don’t have these items then your pre-qualification will only be as good as your estimate of the above figures. However, if you have these items, and the mortgage planner does a credit check, then he/she will be able to issue a “PRE-APPROVAL” as he/she will have reviewed all the documentation needed to approve your loan. It will only be contingent on an acceptable purchase contract, appraisal, title search and insurance. This “PRE-APPROVAL” will give you a much better chance of having your offer accepted, than the more common “Pre-Qualification”, which is almost useless, as your financial background has not been verified and may or may not allow you to purchase the home.

WHAT TO EXPECT:

There is no magic in the mortgage process. But as structured as the process and loan guidelines are, every lender is different, requires different things, and asks for different conditions.

Since you’ve read this article, you have already been pre-approved by your mortgage planner, referred to a highly competent Realtor (mortgage professionals know the most qualified Realtors in the industry, having worked within the real estate industry for many years), and now you are in contract to buy the home of you dreams. Outlined below are the actions that will take place at this point, in a somewhat chronological sequence:

1. Mortgage Planner reviews your contract to insure that the terms are acceptable to the lending community and to insure he/she understands the timelines required
2. Planner contacts escrow and request a title search and a copy of the deed, when it becomes available.
3. Planner verifies your employment either in writing or telephonically (even if this was done at the pre-approval stage it is required again to insure you are still employed
4. Upon thorough review of all submitted income, asset, and title documents your file will be submitted  to a Lender’s Underwriter for final approval.  At this time the lender will send to you a copy of their loan disclosures.
5. Planner orders an appraisal on the property
6. Once final approval is received, your Planner will coordinate with you to make sure you have proper hazard insurance (this can also be done earlier), that the termite report, if required, is clear and that there are no issues regarding your contract that have not been met. At this point mortgage documents can now be ordered.
7. Escrow will receive instructions from the lender and will prepare your final settlement statement and appropriate escrow documents. You will be told the exact amount of funds that will be required by escrow and those funds will generally be required a couple days prior to recordation.
8. You will meet with your Planner at the escrow office to sign the mortgage documents and the escrow documents.
9. Your new home purchase will record in the State Bureau of Conveyances on the contractual recording date and you will receive your keys.

As you can see, it is a very straightforward process and should be uneventful.  There are circumstances that may cause an Underwriter to question something or ask for more documentation.  As your loan is dependent on the Underwriter’s approval we do all we can to fulfill their conditions as quickly as possible.

WHAT NOT TO DO:

Once you are in the process of acquiring a new home there are a number of things that you don’t want to do. Examples are listed below:

1. Quit your job! This is not a good time to decide to change career fields or move to a new position, as it may adversely affect your qualifications.
2. Create new debt (this does not mean that you can’t charge dinner on your VISA card but buying a new car may not help your qualifications).
3. Don’t pay off debt in an effort to improve your qualifications. Your Planner will let you know if you need to do that and which debt to pay off.
4. Borrow money for your down payment (your Mortgage Planner should have verified your down payment funds already). You cannot use your VISA credit line of $30,000 to borrow your down payment, even if you can afford the payment on that debt.
5. Don’t move money from one account to the other account, without consulting with your Mortgage Planner. All of the funds required in the transaction have to be properly documented. Your Planner will tell you when to move funds for the down payment and closing costs.
6. Don’t pack everything, especially financial documents, as you may need some type of unusual financial documentation during the process (or copy of your trust, etc)
7. Decide to take title in Trust, without letting your Planner know.
8. Go on a trip without notifying your Planner. If you will not be available for the signing of final documents then a Power of Attorney may be required.
9. Make any larger deposits into your accounts (i.e., mom or dad decides to give you $10,000 to help out, or you sell your car an deposit $10,000 into savings, etc). Large deposits, which occur within two months of your application, and appear on your statement, will always require an explanation. Large deposit made during your mortgage process will also be scrutinized.

Essentially, don’t do anything that changes your overall financial picture while in the home buying or refinancing process.

Hopefully this will help you as you consider your new home purchase or refinance. Working with a qualified Mortgage Planner from the start will always be your best course of action. When you’re spending over a half a million dollars, on average, for your new home, using your wife’s, cousins, sister who became a “loan officer” two years ago, may not be the best choice.