Gene Mundt, a Chicago loan originator, provides an excellent overview of how to avoid common mortgage mistakes. This is excellent information for Los Angeles home buyers.
When our boys were little, we decided to construct a home in the Lincoln-Way Area of the Chicago Southland. When choosing a lot to build on, we visited subdivision after subdivision in the area.
After deciding on the subdivision we wanted, we began a search for our building site. We walked property after property trying to find the “perfect” lot.
The lot we ended up choosing was located at the highest point of the street … great for drainage. And the lot was filled with trees that, although small at the time, would mature into nice shade for our home once the land was cleared and sunshine could reach them.
After the construction of the home was behind us, there was still a lot to do outside in the yard. We dug, planted, added landscaping, mowed and pruned. After a few years passed, the flowers bloomed, the plants and shrubs matured, and the trees filled out providing the shade we had hoped for. Everything flourished.
Even the poison ivy …
Poison ivy was the one negative I found living on that wooded lot. I ended up itching … a lot.
Now anyone that has suffered through poison ivy will tell you plain and simple … it’s awful. The itching and irritation drive you crazy and it’s hard to get rid of.
I quickly came to the conclusion that the best solution for treating poison ivy was to NOT catch the dang stuff in the first place. I think that’s the best solution for “Mortgage Approval-Ivy” too.
What’s Mortgage Approval-Ivy?
It’s the irritation, angst, and suffering felt by mortgage applicants if they commit one of the following mistakes after receiving mortgage approval:
Mistake #1: Accepting a gift or check from someone NOT named on the Contract or Loan Application and then using it for Earnest Money.
Recommendation: If you are the Buyer and Loan Applicant, the check for Earnest Money should be written from your funds.
Think of this money as an advance on your down payment … or the funds needed to Close – and therefore, that money has to be identified as being yours (or at minimum, communicate to your Loan Officer that the EM will be a gift from a Family Member. Act proactively in this regard. Processing will move more quickly and smoothly).
Alert: Checks from Non-Borrowing, Non-Buying Parties cause problems … and “Mortgage Approval-Ivy”!
Mistake #2: Needlessly transferring money from one bank to another … or from one account to another within the same bank – can cause issues.
Big Misconception: All funds needed to cover down payment and closing costs (commonly known as “Cash to Close”) must be accumulated or deposited to one account. NOT TRUE!
Separate bank accounts (or Investment accounts) can all be verified and documented … and their collective balances can be totaled to demonstrate enough “Cash to Close” (funds needed by Borrower(s) for Approval/Closing).
Alert: Needlessly moving funds back and forth between accounts creates a longer paper trail for documentation. This slows the mortgage process down and causes “Mortgage Approval-Ivy”.
Mistake #3: Working fewer hours during the time leading up to your Application for Mortgage.
Tip: This is especially important for hourly-paid employees.
Alert: Mortgage Underwriters look unfavorably when comparing low/lower, Year-to-Date gross incomes reported on submitted pay stubs to earlier incomes/pay stubs. (The most recent pay stubs are required from Applicants at the time of Mortgage Application). Avoid “Mortgage Approval-Ivy” by continuing to work your normal amount of hours at your job, when possible.
Mistake #4: Accepting cash or “Gifts of Cash”, then depositing them into the bank account for which the funds for Closing are then verified.
Tip: There are NO acceptable means by which Cash can be verified (and found acceptable) by a Mortgage Underwriter.
Alert: Stay safe from “Mortgage Approval-Ivy”. STOP depositing cash into accounts provided for Mortgage Application.
Mistake #5: Changing jobs prior to … or after … applying for a Mortgage without consulting with your Loan Officer (me).
Alert: Even if it’s a better or higher-paying job, avoid “Mortgage Approval-Ivy” by talking to your Loan Officer prior to making any change in employment. That way your LO can advise you as to how to best proceed.
The bottom line is this: Don’t subject yourself to any of these predicaments during your mortgage process. Follow the advice of your Loan Officer from beginning to end.
And should you have questions? Contact your LO and ask them BEFORE you take any action.
It will keep “Mortgage Approval-Ivy” at bay … and keep irritations from arising …
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