By Harold Copher, Jr. • Willow Bend Mortgage
Buying a home or property is one of those really significant life events. The buyer really wants to do it right and between their own thinking and the input they get from well-meaning friends they keep coming up with things that need to get done. Generally speaking, tell them “don’t.” Just don’t do anything!
I’m going to share a very short list of things to do, and a much longer list of things not to do. Here’s the reason. Someone is going to be looking at that loan application and they are hoping to see stability; because stability makes someone believe the borrower will be predictable, paying off this loan just like they have paid off loans in the past, earning a living the same way they have been and maintaining the same saving patterns. You get the picture. It makes sense. You and I would generally make those same assumptions if we were asked to loan our own money and be repaid in monthly installments. Any change in the buyer’s historical patterns makes that buyer’s world look less stable, less predictable and more risky.
So, with that in mind, here are some things homebuyers should do:
- Remind them to take a look at their driver’s license – if it’s coming up for renewal, get it renewed. Don’t put it off – do it now, because we don’t want to go to closing with an expired license (or other ID).
- They should obtain their credit report and review it for accuracy. What do you do if you have a disputed account? How about a medical collection? You might be surprised how often these things show up unexpectedly.
- Submit income pay stubs and tax documents to your lender to help assure your version of your income matches the underwriter’s income calculations.
- Submit bank statements to document “seasoning” of funds.
- Disclose any interests in real property they may be on title to. Some buyers are on title to family held properties, and don’t think of themselves as “property owners” because they never pay any expenses related to ownership.
- Earnest money and option fee checks should be written on the buyer’s own account, and preferably drawn from the account they will be using for cash due at closing. Do not have someone other than the buyer provide the earnest money, unless it’s been planned for and discussed with the lender in advance.
The buyers need to try to keep their credit, assets, debt load and employment status as stable as possible.
Here is that (non-exhaustive) list of things buyers should not do:
- Do not apply for any new credit.
- Do not change their name.
- Do not change employers.
- Do not change the way they are compensated (salary to commission, employee to independent contractor, etc.). If this is beyond the client’s control, let the loan officer know right away.
- Do not open or close any bank accounts (even if you have already moved to a new area and want to establish new banking relationships).
- Do not make any large (in excess of 50 percent of total gross qualifying monthly income) non-payroll deposits or transfers without discussing with your loan officer.
- Do not pay down or pay off debts without consulting with their loan officer.
- Funds for closing should always be from a disclosed account, and from the designated account. Do not tell your loan officer you are going to wire funds from your checking account, but then have the cashiers check or wire to title come from a different account.
- Do not buy new furniture and/or big-ticket appliances between application and closing.
- Do not buy or lease a car until after you close.
- Do not co-sign on any loans.
- Do not substantially change your credit card purchase habits/balances.
- Do not open or close any trade line accounts.
So, the conclusion is to simply be stable and look stable! Of course, that isn’t always possible, but it is certainly ideal. When the situation becomes less than ideal, keep the loan officer in the discussion so nobody is surprised at the last minute.
These are pretty simple concepts, but we probably all know somebody who has done that and wished they hadn’t! RL