Good Habits for a Smoother Loan Approval

With the increased federal and state regulations governing today’s mortgage financing, both lenders and borrowers are having to work a little harder to meet the guidelines to secure a mortgage loan approval.

To improve your loan approval experience, here are some helpful tips and good habits you should keep in mind to help secure a successful loan approval.

1. Monitor and maintain your bank account(s) to ensure there is always a positive balance.

Any negative balances or NSF charges reflects on your ability to maintain your finances.

2. Begin preparing your finances for your home purchase 60 days prior to applying for a pre-approval.

Lenders often review your bank statements (including all pages) covering the 60 days prior to your application, all the way through closing. Many programs require the lender to track and source any deposits or withdrawals within your accounts outside of your payroll deposits during the entire loan process. When funds are not easily linked to a paycheck, this can result in additional documentation being required from the borrower to verify where the money originated and validating it’s an acceptable source; sometimes causing delays in the approval process.

Please note that transfers between your own accounts can be considered deposits so it is best to avoid moving your funds around between accounts whenever possible.

3. Receiving monetary gifts from a relative? Speak with your loan officer prior to accepting the funds.

Lenders are required to follow a specific process and set of rules when it comes to monetary gifts used for closing costs or down payments; any gift funds deposited during your approval process and up through closing will typically be considered as part of your transaction. Your Summit Mortgage Loan Officer will be able to walk you through the process step-by-step to ensure your gifts will be able to be used.

4. Restrict Credit Checks or opening new accounts.

Mortgage loan applications require a credit check and monitoring of your credit throughout the process. It is best to avoid having your credit pulled by applying for any new accounts, this can result in your credit score decreasing. If you do apply for credit during the duration of your process you will be asked to complete a letter of explanation outlining the reason for the inquiry and if new credit was obtained you will need to provide documentation about the account to ensure it is considered in your debt to income ratio.

5. Avoid closing accounts or taking part in any atypical credit behaviors.

Any atypical activity on your credit accounts can cause your score to drop – this can include opening or closing accounts or charging a higher amount than usual on your card or account. Closing existing accounts can impact the longevity of your credit profile, resulting in a decrease in score. Charging a higher amount than normal on your accounts can result in your score decreasing and your debt to income ratio being impacted. Often if the balance of your account goes over 50% of the limit it can lower your credit score.

It is best not to change your credit picture in anyway unless you are specifically advised by your Loan Officer to do so.

Have questions? Want help getting started? Complete our Quick Start Form and we’ll connect you with a loan officer that matches your specific needs. They’ll provide a free consultation and guide you through every step of the loan application process.