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Five Mistakes Borrowers Commonly Make When Filling Out a Mortgage Loan

Written by Posted On Tuesday, 08 May 2018 17:43
Mortgage Loan Application Mortgage Loan Application Adobe Stock

According to a recent study, 42% of prospective homebuyers looking to obtain a mortgage loan claim that the application process is stressful. Moreover, 32% found it complicated. Thus, it comes as no surprise that many complete the paperwork and walk away more than a little confused over what they just agreed to do. While that might be the reality, it shouldn’t be, as a mortgage loan is one of the most important documents you’ll complete on your way to owning the home of your dreams. It’s also a major financial decision, and one that shouldn’t be taken lightly. Let’s take a look at five common mistakes that are easy to make during this process, and how you can avoid them moving forward.


1. Moving around your money. One of the first parts of completing the mortgage loan application is listing your assets. From your work-related income to other real estate properties you already own, your vehicles, and more, it’s important to list these figures as accurately as possible. For one reason or another, you may feel compelled to move or relocate these funds, perhaps in a shady effort to appear to own less than you actually do and thus quality for a lower rate. It’s in your best interest to leave all of your assets as they are, however. Doing so will help speed the application and approval process along and get you those house keys quicker. If you do have a valid reason for which you need to move money around, always contact your mortgage loan officer first, prior to making the switch, and make sure he or she is aware of the steps you’re taking.


2. Not keeping detailed deposit records. To ascertain your loan approval amount, your loan officer will need to review detailed accounts of all large deposits that you’ve made into your checking and savings accounts. If a large sum remains unaccounted for, the time it takes to research its origins and interview you on its history could delay the procedure. Your best bet is to keep detailed records of everything so you’re always ready to produce the associated paperwork if required. From a work paycheck to the sale of a car or high-priced valuable, there are myriad reasons why you might make a hefty deposit into your account. Keep all of the related paperwork, make backup copies, and inform your loan officer of the details so everyone is one the same page.


3. Failing to document monetary gifts. You might think that the money you received from your great-uncle’s estate doesn’t come into play when applying for a mortgage loan, but it does. As such, it’s important to keep detailed records about these as well. It’s also common to deposit large gifts of cash during the beginning phases of home ownership. Friends and family members might be helping to foot the bill, and as such, are supplying you with larger-than-normal sums of cash. If you anticipate that gifts of this kind will be coming your way (or have already occurred), let your loan officer know as soon as possible so nothing slips through the cracks.


4. Adjusting your credit score. Your credit score plays a major role in your mortgage loan approval process. As such, it’s wise to hold off on making any new changes to it, either positive or negative, until the timeline is complete. For instance, you may be inclined to open a new credit card during the application process, but keep in mind that doing so will spur a new credit inquiry, which would knock your score down. Or, you may be ready to finally start paying off that credit card debt that’s been accumulating. Regardless, speak to your loan officer before moving forward with either of these changes. He or she will need an accurate and up-to-date version of your credit report and changing the score halfway through will only derail the process.


5. Failing to keep financial documents organized. It’s easy to become overwhelmed by financial documents, especially when you’re going through the mortgage loan approval process. After all, there are so many papers to sign and folders to keep that it’s understandable to lose track. That might be why statistics show that 54% of Americans are overwhelmed with clutter and are unsure how to remedy it. Yet, it’s in your best interest to be as neat as you can, especially when it comes to these papers. You’ll need to be able to readily supply any documentation your loan officer requires and if it takes you days to dig through your file folder to find it, you could push the entire process back. Keep all of your bank statements and other financial papers as organized and neat as possible to avoid this. You may need to keep a binder to separate the folders by topic or date.


Ultimately, applying for a mortgage loan doesn’t have to be painful and your loan officer is in your corner. Still, it helps to be as up-front, honest, and organized as possible to ensure that his or her job is both simple and straightforward. After all, helping, not hindering, these important steps can get you into your home faster than you thought possible and help you put the lengthy application process behind you for good.

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