How the Mortgage Process can go WRONG

By: Nathan Gillin

Even if you follow the 9 Steps to Mortgage Approval, it is possible that the mortgage process can still go wrong. When buying your house and applying for a mortgage, keep these in the back of your mind and avoid them whenever possible.

#1 Debt-to-income ratio is close to/greater than the cap

You are more likely to have your loan application rejected last minute when your DTI is poor. If you are close to the DTI cap (roughly 50%) and eventually exceed it during the mortgage approval process, you could run into an issue.

#2 Not abiding by the minimum waiting period after foreclosure

There is a roughly a 3-year waiting period that you have to abide by in order to apply for a mortgage after a foreclosure. It starts on the exact date the foreclosure was recorded at the county’s Recorder of Deeds Office. Lenders always pay attention to credit history and public records, namely foreclosures. 

#3 Poor credit history and/or credit disputes

Mortgage underwriters will get suspicious when credit disputes are evident on your record, especially unpaid balances exceeding $2000. Even if the disputes are retracted, the credit score is going to go down with it.

#4 You don’t have the sufficient documents

Though you may be able to get pre-approved with little to no documentation, it is essential to have employment letters, bank statements, pay stubs, tax returns, and confirmation of your down payment funds during the actual underwriting process.

#5 Changing jobs

Though sometimes uncontrollable, a change in your employment situation does not always bode well with a lender who is looking for stability in the buyer. 

#6 Making big purchases, account changes days before closing

These things can jeopardize the criteria that got you pre-approved, such as DTI ratio, credit score, assets, and cash reserves.

-Big purchases like cars are especially something to avoid prior to getting an approval. Hold off until after your mortgage is completely approved.