Tips for Real Estate Loan Approval
Looking for real estate can be an exciting time! If you are like most Americans, you’ll probably be getting a loan to purchase property. Keep in mind that getting a loan can be a long and tedious process. Your lender needs time to gather and review ample documentation before giving you final loan approval. Below are twelve tips to help you receive that important loan approval status.
- First and foremost, the more up front you are on the application forms the easier the process should be. Everything is thoroughly reviewed and verified.
- You’ll need to prove that you have steady employment and income. Try to avoid a change in your job. Moving positions within your company may even affect your loan approval.
- Large purchases during the process can certainly have negative consequences. You’ll need to prove that you have the funds for a down payment. It can also negatively affect your debt-to-income ratio.
- Avoid running your own credit reports as it can impact your credit score. As tempting as it may be, let the lender handle this.
- Depositing or withdrawing large amounts of funds can be a red flag for lenders. They’ll most likely require documentation to review.
- Do not open or close any banking accounts. Avoid transferring asset accounts as well.
- Always pay your credit cards, other loans, and bills on time. Missed payments can negatively affect your credit score. If you dispute a bill, there’s a chance it can negatively affect your credit score as well.
- Applying for a new credit card can hurt your chances of loan approval. Do not make any large payments, and do not increase your credit balances by a significant amount.
- Cosigning a loan during your loan application and closing process is not advised. This can greatly decrease your chance for loan approval… even if you are not the person responsible for the payments.
- Do not start any home improvement projects. Again, avoid opening any lines of credit.
- It is suggested not to make an offer until you receive prequalification. Prequalification will make your offer more enticing to the seller.
- Of course, make sure you have a realtor involved in your real estate transaction. Your realtor will be a great source of information for you and will help answer any questions you may have. He/She will most likely have recommendations for a lender as well.
Below is a list of documents your lender will most likely require from you.
- Driver’s license
- Social security card
- Recent mortgage statements if you already own real estate
- Homeowner’s insurance declarations for any real estate you own
- HOA statements for real estate you already own
- Most recent paystubs
- W-2 statements for the past three years
- Individual and joint tax returns for the past two years
- Bank statements for at least the past two months
- Any accounts or other required payments (such as child support)
- Lease agreements for rental properties
- HUD-1 Settlement Statements/Closing Disclosures for any recent real estate closings
- Homeowner’s insurance provider
It’s best to be prepared and have all these documents ready to submit to your lender. Underwriters are often backlogged and submitting your information early can help meet your closing deadlines. If you have any questions about this process, please feel free to call me at (970) 209-2421 or GHuresky@LivSothebysRealty.com.