Applying for a mortgage: tips to sail through underwriting
If you've ever gone through the process of applying for a mortgage and then going through underwriting then you know that the process is an arduous one. You must have all of your ducks in a row or you risk a multitude of questions that only serve to hold up the process and keep you in a permanent state of frustration.
So how do you avoid getting caught up in a string of questions and delays when the only thing you can think about is closing on your home? Here are a few tips to help you sail through the underwriting process:
Manage your credit early and often
From the moment you get serious about buying a home, you need to become best friends with your credit report. Check it early and often. Check for any errors in reporting and resolve any accounts that may be reporting incorrectly or derogatory. You may not be able to erase late payments but you are able to resolve open and active collections, judgements and/or liens. Check into a credit monitoring service that will give you instant alerts should anything change on your profile.
Applying for new credit
This is often a red flag for underwriters. If you're in the process of applying for a new home, then any application for new credit is a cause for concern. This tells the underwriter that you are in some ways unstable because they are unsure of how much new debt you will incur by the time you close on the home. Underwriting is about making a determination with some level of certainty that you will be able to afford your new home. Applying for new credit makes that final determination a moving target.
Any income that you wish to have considered for your loan application needs to have a legal and verifiable source. The money that you collect from your "side business" that wasn't filed on your Schedule C with the IRS won't count towards your gross income on your application. Make certain that you're documenting any and all income to avoid lengthy questions and delays.
Unstable job history
Given the instability with the economy, underwriters can be forgiving in this area. However, if you've had a consistent pattern of going from FT to PT jobs or going without a job for periods of time then this will become a red flag on your application. If you're coming out of a period of employment instability then it is best that you remain in that new job for some time, get your finances together and then apply for the mortgage. This shows that you're interested in maintaining economic stability in order to prepare for the financial responsibility of a home.
Follow the above-mentioned tips and you'll be on your way to a smooth underwriting process. Remember, preparing to buy a home is a carefully planned and often strategic process. Plan accordingly for a smooth sail through underwriting.
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