Do’s & Don’ts for a Smooth Loan Process

To ensure a smooth loan process from pre-approval to closing, beware of these common mistakes:

Don't make expensive purchases. It may be tempting to order a new sofa for your soon-to-be living room, but its best to avoid making major purchases until after closing. Financing with a store credit card or even existing credit cards could jeopardize credit scores or debt to income ratios. Even using cash to purchase big ticket items can create issues as many lenders take cash reserves into consideration when approving a loan.

Don't switch banks or transfer money around. To avoid a lot of extra paperwork and explanation, don’t move money around during the loan process. The lender will ask for 2 months bank statements to document funds for closing and cash reserves. If there are any transfers or non payroll deposits, a paper trail must be provided to show the source of funds.

Don't Change Jobs. Lenders like to see a consistent job history. Generally, changing jobs will not affect a borrower’s ability to qualify for a loan, especially if income is increasing. However, if the pay contains commissions, bonus or overtime, likely this portion of income will not be used for qualifying as there is not sufficient history of receiving the income.

Don't disregard lenders requests. Pre-approved may have been granted, but the work on the loan is far from over. Prior to closing, the lender may ask for updated documents such as pay stubs, bank statements or even a new credit report. Keep records handy and credit in good shape while your loan is in process and always respond quickly to lender requests!

~ Courtesy of Wendy Charles, LoanCentral LLC, 425.468.9321, WendyC@LoanCentral.com