Qualifying for a Mortgage, we went from one extreme to the next! 3 years ago, if you had a social security number, stated your income and ordered an appraisal (with practically a stated value), you were good to go.
Today, when The Mortgage Lady meets with a potential client, one of the opening statements is “we are going to be required to document your documents” and, ask them to not be insulted when the investor has conditions that are beyond what they would expect.
We live in a country where our justice says, we are innocent until proven guilty, everyone has their day in court. In the mortgage world, you’re a fraud committing deadbeat WHO LIVES IN A SHOE until you have had your day in court (we call it underwriting)
Because the market was wrong in creating loans available to everyone, who were not even required to show a pay stub or bank statement, and allowed “the liar loan”, today’s buyer is paying the price.
Previously we needed no pay stubs , today’s buyer must provide 30 days of pay stubs, w2’s for the past two years, and in some cases, two years of federal tax returns. Of course, that is not enough; the lender is then required to pull your tax transcripts directly from the IRS, need to make sure everything matches. And, we are not done, then it is time to contact the employer to get verbal verification of employment, not just once, but twice!!! Once when the loan process starts, and again within 24 hours of closing, on your new home. The investor wants to know that you are employed, that your employer does not have plans for layoffs or pay reductions, and that you are likely to have continued employment. And that is the requirement for hourly/salaried employees, the requirements grow for self-employed, commission or bonus paid folks!
Previously, no bank statement, today’s buyer must provide 60 days of banking history, all pages, even if blank! And heaven help us all if you have a deposit on your bank statement that is not identified as a payroll deposit! All deposits must be sourced and documented. Stating that you had been saving coins for the past 10 years and put the cash deposit in your account is not going to fly; cash is an unacceptable source (what’s cash by the way) And, if a relative is gifting you some money, they best be ready to be part of the spot light. Until you prove otherwise, that money got wired to you by Fidel Castro. The person giving the gift will be required to show proof they had the money to give you by providing their bank statement (a cancelled check, no dice, not enough). Then they have to show the money being withdrawn and get their bank statement updated to show the money leaving the account (again, a cancelled check, no dice, not enough). And guess what, if the person giving the gift has non-payroll deposits get ready to write an explanation for that too! Better take a photo copy of that check before you deposit the check too because now you, the buyer, need to show proof it was from the donor, and proof of deposit into your account, and update their bank statement showing the money has been deposited.
And, you better remember every detail of your payment history, because your credit report does (or does it?), and you are going to have to write letters of explanations for everything, and my dog ate the bill is not going to fly! Cross your fingers for a 720+ score, or you are nothing but below average, 680 use to be looked at as decent credit, not anymore, you can still get a mortgage with as low as 640 with some investors, however, for best pricing and rates, you need above 720. Your credit report will be pulled at the beginning of the process. Do not think you are done and go out and spend money, for example ON A new couch, because your credit is going to be pulled again the week before closing, and if your debt has increased by more than 5%, you might not get your mortgage. And, that 15% discount off that you will receive for taking out a new credit card at the mall, you better be sure it was worth the discount, because it could stand between you and getting a mortgage.
The moral of the story, please do not wait until 2 months before purchasing to get pre-qualified, it is more important now more than ever to meet with a mortgage lender 6 months prior to buying. That way, if any of the crazy little “hick ups” are in your way, your lender can put you on the right track for home ownership.
It is one of the best times in history to purchase WITH THESE low housing pricing and low rates. Do not be scared, be prepared. Get financially naked in front of your loan office, and be a healthy homebuyer!
When it comes to searching for real estate online, I invite you to check out the Home Buyers Scouting Report® (HBSR) from Home Buyers Marketing II, Inc. The HBSR is a FREE, secure website that lets you customize your home search and view all the available homes in this market that match your personal search criteria. And, when newly listed homes that match your search criteria become available, you’ll be the first to know with email alerts from HBM II. Click on the link to start your search or contact me for more information.
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