My son who lives in Colorado recently decided to buy his very first home. He did some research and found out that his house payment, including taxes and insurance, would be about the same as the rent he was currently paying each month. It's a no-brainer, right? Of course he first came to 'yours truly' for some upfront advice but he also got into some questions that were more state guideline specific and not how to qualify for a home loan. I asked him where he has his checking account and he told me which bank he uses and I told him to start there.
I also gave him some advice on what sort of documentation he will likely need to provide and it's a good idea to start gathering that information now instead of waiting for his bank to ask for it. So he did, and stored the documents on his laptop. I told him that even though he's gathered all that information it's possible the bank won't ask for everything. Just keep it handy in case it does.
So his quest began. He spoke with the loan officer at the bank who then provided him with a qualifying loan amount. He had a decent down payment, even for a first time buyer. He had some of his own money saved up at the bank but he was also the lucky recipient of a Trust with his name on it containing more than enough funds for his down payment along with closing costs and with some more left over. He was in a good position. He also checked his credit score and it came out to 750. The kid was doing all the right things.
After speaking with his loan officer he submitted his preliminary loan application. He also got a referral for a local real estate agent who began sending him homes to look at. After a few days, he found a couple he really liked and asked me what I thought of them. They were both 2-bedroom condos, a nice starter home for him.
The very next day, he called me, freaking out. He sent me a copy of the list of questions the loan officer had. I walked through them all with him. One thing that stood out to him and really had him worried were his gaps in employment. When he graduated, he took a few months off for a mini-vacay well deserved after four years of school. The loan officer wanted an explanation as to the time lapse between graduating and starting a job. Next, the loan officer asked about a one-week gap of employment from his first job to his next one. Personally I felt this was a little over the top for this one but whatever.
I told him just to answer the question. State that you took some time off after graduation for a short vacation and as it relates to the second employment gap, just say you took off for a week in between jobs. I said they're not going to scrutinize his answers. I told him he could say he took some time off to visit the jungle to teach monkeys how to peel bananas. I was joking and told him not to say that but just tell the loan officer exactly what happened.
He did. He got his approval just as predicted. The employment gaps were a non-issue but something that lending guidelines require. No need to embellish anything. Just explain what happened. That's it.
