These days, it’s incredibly hard to buy a house in Sacramento. The real estate market is overflowing with buyers, who are all competing for an extremely limited, less than one month, supply of homes.
Whether trying to purchase a primary residence or an investment property, there are multiple offers at every price point, and overbidding by thousands of dollars is commonplace.
When a buyer does get the winning bid, it’s a big deal, and a collective sigh of relief can be heard from them and their agent. The hardest part of the entire buying process is now behind them…maybe.
Now, the loan process begins. A buyer should be well past the application and prequalification by this time. The lender should have all the buyer’s pertinent financial documents and should have reviewed them to establish the buyer’s loan qualifications. Conventional, FHA, VA, USDA…it doesn’t matter what type of mortgage a buyer qualifies for; the mortgage loan is the lynchpin to the entire transaction.
It’s crucial, especially after all the blood, sweat, and tears it took to get an offer accepted, that the buyer understands what they can and, most importantly, cannot do during the loan process.
6 things buyers should know for a smooth loan process…
- Employment - If a buyer loses their income, they can’t make the loan payment. Quitting a job, getting fired from a job, or changing jobs in the middle of escrow, is a kiss of death. At the end of the loan process, the lender performs verification of employment (VOE). Income is the most critical factor, and if the buyer’s job can’t be verified, the underwriter will issue a denial of the loan.
- Credit Cards - It’s natural for buyers to get excited about their new home and start acquiring things to furnish and personalize their space. Using credit cards to purchase said items increases a buyer’s debt-to-income ratio (DTI). Credit will be run twice during the loan process, once during the application process and again before the loan funds. An increase in DTI can push the buyer’s qualifications outside of the loan guidelines.
- New Credit - Most mortgage professionals will say it with a snicker, “Don't go out and buy a new car…hahaha…,” but they couldn’t be more serious. Opening new lines of credit creates additional risk and could also negatively affect a buyer’s DTI.
- Keep Current - It’s always a good idea to pay your bills, but there is no worse time to miss a payment and negatively affect your credit.
- Large Deposits - Avoid large deposits that aren’t related to income. Loan underwriters comb through a borrower’s credit history and bank statements. Large deposits that are out of the ordinary raise a red flag. Underwriters will require a borrower to source those funds if they appear within the last 60-90 days prior to submission for final approval.
- Ask Your Mortgage Professional Questions - We all have amazing information at our fingertips…some good, some not so good, and some can be outright wrong. Google, Instagram, Twitter, and Facebook are all sources of information and can create confusion. Before making hasty decisions, discuss internet findings with your mortgage professional to gain clarity from the expert that was hired to serve your needs. It can save a buyer from making an emotional response they may later regret.