December 08, 2021 at 9:41am | Mikkel Dybvig

Some Do’s and Don’ts to Getting a Loan for a Home in 2022

We have all seen commercials on TV telling you how easy it is to get a loan for a home these days, Just a click of a button! Right? Well not always. While the Fast Spaceship loan company (name has been changed but I think you know to whom I am referring) wants to make you think it's as easy as ordering a pizza, there are some big Dos and Don’ts to consider when applying for a loan.

Let’s start with the Don’ts!

DON’T:

Don’t apply for any new credit! As a Realtor I have seen this happen and ruin a families chance at finalizing their loan. “Hey Mikkel, good news, we just went to Home Depot and got all our appliances ordered for the new home! They gave us a great deal on financing for them.” Fantastic, now you have some beautiful new appliances to put into the apartment you have been renting since you now won’t qualify for the loan. Not only did someone pull your credit (which can have a negative affect on it), but now your debt to income (DTI in lender lingo) has changed and you may not qualify for as much of a loan as you will need to close.

Don’t spend your closing cost money (on anything other than closing costs) before the home is closed! This should be a no-brainer but it does happen. I tell my clients to save between 2 and 3% of the purchase for closing costs. I always estimate high because it is better to have more than you need than to have to scramble to find extra money under the couch cushions the day before you are supposed to close. You should know the exact amount you need right before you close, but what’s the harm in waiting until you are in the home to spend that extra cash?

Don’t quit your job, just yet. Even if you have another job ready to go that is in the same field it can cause delays if your lender is not expecting it and has not planned for it. They will verify your employment right before your loan is approved so don’t try and be sneaky and quit right before and hope your loan will go through!

So now to the Dos.

Do:

Do respond to your lender promptly! You would think that this would be common sense but you know what they say about common sense not being all that common… When they call you and ask for documents, it is usually to help you get your loan and not just because they are looking for a reason to bug you at work. The longer you take to get back to them the more likely it is that there could be a delay in your approval.

Do continue to pay your bills on time! You don’t want to do anything that could have a negative affect on your credit right before you get your loan approved because it can lower the rate you get, or at worst disqualify you from being approved. And besides, this is just called being a responsible person.

Do be prepared to account for any funds deposited into your bank accounts, other than regular payroll, that you plan on using to buy the home. You will need to be able to explain where they came from, and that they are not another personal loan or debt obligation that could affect your debt to income ratio. If it is a gift, a gift letter will usually do, proving that you don’t have to pay it back.

This is by no means an exhaustive list of dos and don’ts when it comes to applying for and getting a loan approved. You should definitely speak to a lender about any concerns you may have about your particular situation. I personally prefer a local lender who can not only get you a great rate, but will be there to help answer all your questions, a lot of times in person. If you don’t know where to start in your search for a loan, your Real Estate agent is sure to have a few trusted partners that they can send your way.

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