The Loan Officer’s List of Pre-Mortgage Do’s and Don’ts
Guest Post by Anthony Powell
It’s no secret that military families move around (a lot). Permanent Changes of Station (PCS) occur more often during the summer months but they can happen any time during the year. I know I’m preachin’ to the choir, but you and I both know that they can be disruptive and stressful for military families of all sizes and experience levels.
One of the biggest decisions that a family faces before the big move is deciding to if they want to rent or buy their home. Timing, location, and anticipated length of the relocation are all factors to consider when deciding to rent or buy a home in their new town. For families looking to take the big step toward a home purchase and mortgage, here’s a helpful list of pre-mortgage do’s and don’ts for tackling the mortgage application process!
Apply for a pre-approval before you start looking for a new home
There are many advantages to getting pre-approved ahead of the home search process. It solidifies your budget and prevents you from viewing and falling in love with a home that you cannot afford. Many realtors will request a pre-approval before showing a home. Having one gives you a bit of leverage when it comes to negotiating offers on homes.
Find a trustworthy realtor, preferably one who is familiar with military mortgages
There are countless resources available which can help you search a database of military-friendly realtors by location and experience. Often, resource sites like these will also include reviews and recommendations from other military families. You may also want to consider implementing a buyer/broker agreement with your realtor. This ensures that they work in your best interest. They won’t get paid until the close of the home, unlike the realtors working on behalf of the seller.
Keep an eye out for ways to save money
Even if your finances are relatively stable, it’s a good idea to live frugally until the close of the home. Consider any additional assets you might have available to strengthen your loan. If you already make regular contributions to a savings account or “rainy day fund”, think about increasing these deposits in the months before the move. This allows an increased cash cushion to cover any unexpected expenses also giving you peace-of-mind. The extra cash flow can also come in handy if you need to furnish your new home after moving or cover any other incidentals.
Provide comprehensive and transparent bank statements
It’s in your best interest to provide complete bank statements up front. You don’t want your loan officer to request additional pages and assume that you are hesitant to show them everything. Aside from pay stubs, all large deposits should be well-documented. Organization and transparency will save you a lot of time and will show lenders that you’re serious about the process.
Change jobs without notifying your loan officer
This is another scenario where transparency helps. If you or your spouse are actively searching for a new job or in the process of accepting an offer, it’s crucial to let your loan officer know. In most cases, a career change will require additional documentation. It can delay the closing process too. A surprise change of employment can even lead to your approval being voided. When in doubt, always reach out to your loan officer or broker. They can help guide you toward the best course of action.
Check your credit unnecessarily
We know that you can’t always avoid credit checks. However, if you can, try not to allow any unnecessary pulls on your credit. It can cause your scores to drop. Whenever possible, use a service like CreditKarma or CreditSesame that allows you to check and share your own score without negatively impacting it. If you know that your credit has been or will be pulled by someone for any reason, let your loan officer know. Then they can anticipate a possible change and understand its cause.
Open new credit or cosign on any loans
Once you’ve applied for a loan, don’t open a new credit card or initiate a new credit account. In addition to lowering your credit score, it can delay closing on a home or result in a loan denial. Leaving you back at square one. You’ll also want to notify your loan officer of any plans to cosign on other loans. This includes student loans that may be deferred, as they will still count as debt. Additionally, be careful about applying for certain payment plans on large purchases, such as furniture. Often a “no payments for six months” offer is viewed as a loan for underwriting purposes and will count as new debt that may impact your approval. It’s always a safe bet to consider these types of purchases after your mortgage loan has closed.
Deposit cash into your account
This one may seem odd, but cash deposits are difficult to accurately source and document. These funds can actually negatively impact your assets. Loan officers must be able to verify that all your assets have come from identifiable sources. Don’t add it directly to your account. Similarly, if you receive a financial gift from a relative or friend to put toward your house, let your loan officer know so they can properly document the gift deposit.
Move money between accounts
While it may be tempting to transfer unneeded funds to a savings account that will generate some interest, this can actually cause more trouble in the long run. Your loan officer has to property document every transfer. This can slow down the approval process. At the end of the day, this delay is typically not worth the small amount of interest you may receive.
When a military family looks at new homes, there is a lot to consider. This list can provide a good starting point for military families who are going through a mortgage application process. However, it is always helpful to reach out to your loan officer or financial advisor as well as browse military-friendly resources, such as those found on the AAFMAA Mortgage Services website to help learn more or address any questions about your unique situation.