Making Good Choices for a Smooth Home Loan Process

Cardinal Financial August 24, 2016 | 5 min read
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Like with any major life event, there are good and bad choices you can make when you’re trying to secure a mortgage. Ensure your loan process with us is smooth and seamless by following these simple steps.

GOOD: Removing any open credit disputes on your credit profile

If you added a consumer statement to your credit report, it’s best for you to remove it in order for us to accurately assess your credit score and approve your loan. Adding consumer statements is a common practice that can be helpful in removing credit disputes on your record. However, disputes take time to remove, so it’s best to do this well before you apply for a loan. In order to lift the dispute and remove the statement, simply contact the creditor and request removal. Ask the creditor to provide a letter confirming the dispute has been lifted so that, if necessary, you can supply this letter to us.

GOOD: liquidating or making available any loans or gifts.

Before we can approve your loan, we will review your bank statements to ensure any 401(k) loans, gift funds, IRA distributions, CD liquidation, or investment fund liquidations have been completed and are available in a checking or savings account. This step ensures that your loan amount and payment plan is accurate for your income and assets.

GOOD: unlocking any credit report freezes.

Credit freezes are designed to prevent a credit reporting company from releasing your credit report without your consent. These take time to clear. If you have freezes on your credit report, be sure to remove them for all three of the major credit bureaus (TransUnion, Equifax, and Experian) before your loan process begins. You should not reinstate these until your loan is fully funded. If you begin the loan process before clearing the freezes, it can delay the processing of your loan and cause you to incur additional fees for rate lock extensions.

GOOD:  resolving any derogatory credit items.

Derogatory items (such as collections, judgments, and charge-offs) can negatively impact your credit score and prevent you from getting the best deal possible—or prevent you from getting a loan at all. Before you shop for a mortgage, obtain a copy of your credit report from all three credit bureaus (TransUnion, Equifax, and Experian) and clear up any derogatory items or resolve disputes.

GOOD: making all payments on time.

It’s important to make sure you pay all bills on time while your loan is being processed. We are required to update your credit report prior to your loan closing and any missed payments could jeopardize your loan.

BAD: changing jobs during (or right before) the loan process.

When you take out a mortgage with us, we will review your two-year employment history, including income history and consistency. Most loan programs require that we review and verify your earnings through 30-days worth of pay stubs, your W-2 Form, and your IRS Form 1040. If you don’t provide this evidence, you may not qualify for a loan, and changing jobs during or before your loan process begins may hinder our ability to verify your employment and income.

BAD: allowing anyone to run your credit report.

Toward the end of your loan process, we will access an updated version of your credit report. If you’ve had numerous inquiries since we accessed the initial credit report, this could bring down your credit score and may result in less-favorable loan terms or loan denial. This kind of activity would require a written explanation as to the reason for and outcome of the inquiry. To avoid any hassle, it’s best to wait until after your loan has funded before checking your credit score again.

BAD: taking on new debts.

It’s part of the loan process to ensure you haven’t acquired any new debts during the loan process. If we find new debts on your record, we’ll have to include them in your debt-to-income ratio (DTI). In such a situation, we would require you to explain the new debt and its terms. If your DTI is already close to the maximum allowed by the lending guidelines, the added debt could result in loan denial.

BAD: cosigning for anyone for any type of debt.

Like taking on new debts, you shouldn’t cosign on anyone else’s debt either. If we discover a newly cosigned debt on your record, we will have to include it in your DTI—even if someone else will be making the payments. If your DTI is already close to the maximum allowance, this new debt responsibility could result in loan denial or a change in your approved terms. If you plan to cosign for someone else’s debt, be sure to do it after your new loan has funded.

BAD: transferring funds or making any large deposits.

If such funds or deposits cannot be verified (such as cash gifts or cash on hand) it’s better to wait until after your loan has funded. We will review your bank statements and examine any large deposits other than payroll deposits. Large deposits, undocumented funds, or any similar activity can cause delay or denial of your loan altogether.

It’s our commitment to ensure your loan transaction with us is exceptional. Follow these dos and don’ts and see how mortgage lending can be simpler than you thought.

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