Once your loan application is submitted the application is reviewed “as is.” This means the information appearing on the application is valid at the time it was completed. If things change while you loan is being processed, there can be some delays as the new information is documented and verified. To make sure your loan is processed and approved on time, avoid these actions.
Switching jobs.
One of the primary functions lenders perform is making sure there is enough monthly income in an account that can handle the payments. This is typically performed by reviewing copies of the most recent paycheck stubs covering a 30 day period. When someone applies for a loan and submits paycheck stubs then shortly thereafter finds another employer during that period, those paycheck stubs are no longer any good. Plus, it will take at least another 30 days to obtain paycheck stubs from the new employer.
Borrowing money.
Lenders will verify not only that you have enough money for a down payment, closing costs and cash reserve requirements but that those funds are yours and yours alone. Your submitted account statements where these funds are coming from should have your name on them. Funds in an account should also be “seasoned” meaning they’ve been in the account for a while. Most lenders assume if an account has a balance showing sufficient funds to close for at least 3 months, the funds are yours. Borrowing money implies monthly payments to the lender at some point in the future.
New loans.
This is emphasized at the outset. Don’t apply for a new credit account of any type. This will stop the lender from moving any further. How does a lender know someone has applied for new credit? Many may not be aware that lenders not only review a credit report upfront but also make one final review immediately prior to funding the loan. Why? As a loan application is being reviewed, a new request for credit will show up on a credit report. Even if no new account was taken, a record of a recent credit request will be listed. The lender will see this new request and stop everything until more information is known about the inquiry. Is there a new loan taken out? A credit inquiry won’t have any of this information on the credit report, but it will raise a red flag during the approval process.
Valuation issues.
This can be a problem when the sales price and the appraisal value don’t match. When an appraiser first reviews a property, a copy of the sales contract is provided. The appraiser uses this information as a starting point to arrive at a final value. Most often, these two amounts are the same. If, however, the sales price is higher than the appraised value, the borrowers are asked to come to the closing table with the difference. Most often than not, borrowers decide not to pay the extra funds. In this instance, the buyers and sellers may elect to renegotiate the sales price.
Tracking funds.
This issue can come up when a borrower receives a financial gift from a family member or qualified source but is not documented as a financial gift…it just shows up in the applicant’s account. Just as borrowed funds can be an issue, so too can undocumented dollars. If planning on receiving a financial gift to help out with the purchase, the gift funds need to be documented from the donor to the applicant. As well, a financial gift letter should be completed from the donors stating the transferred funds are a gift and there is no expectation of being repaid.
