Las Vegas Review-Journal (Sunday)
The 10 worst things you can say to a mortgage lender
Some comments could cost you the loan
Getting a mortgage loan is an involved process that requires a full examination of your financial background. You’ll likely have to answer countless questions and complete a mountain of documentation — and you’ll probably have your own questions to ask and comments to make.
Be careful about what you say to a mortgage lender, however, because it might just end up getting your application denied. Avoid saying these 10 things a mortgage lender doesn’t want to hear and increase the likelihood of having your application approved — and getting the best mortgage rate available.
1. Anything untruthful
Lying to a mortgage lender can ruin your chance to get approved for a loan.
“Lying, omitting or providing misleading information on a mortgage application is punishable as a felony. It’s treated as mortgage fraud and that’s bad,” said Dan Green, a 15year veteran in the mortgage lending industry and founder of financial education website Growella.
“Mortgage lenders are required to perform verifications and reviews of key financial documents,” Green said. “They’ll very often uncover the items an applicant is trying to hide. That will get your loan denied in underwriting.”
Just be truthful and it could work out in your favor, said Green. “Mortgage lenders will work with you to overcome obstacles in your approval process. It’s what a good lender does. Be open and honest and let your loan officer go to work,” said Green.
2. “How much can I borrow?”
Asking a mortgage lender how much you can borrow is a clear sign you haven’t done your homework, and it paints you as an uninformed consumer. Or worse, someone who doesn’t consider the financial impact of a large loan.
Borrowing the maximum limit offered could also cause you to entangle yourself in a financial trap, said Eric Roberge, certified financial planner and founder of the financial planning company, Beyond Your Hammock.
“Avoid borrowing more than you need to. Maxing out your budget now can limit what you can do down the road. What happens when you want to add to your family or start a business? You may find yourself cash-strapped due to that big home loan,” Roberge said.
Just because you qualify for a large loan doesn’t mean you should accept it. Ask yourself how much you should — not could — borrow to direct your focus on an amount that
LENDER
will comfortably fit your budget, said Kathy Cummings, senior vice president of homeownership solutions, Bank of America.
3. “I can’t believe I forgot to pay my electric bill again.”
Consistency is the key to managing a large debt like a mortgage loan. If you mention that certain bills slip your mind from time to time, it won’t inspire confidence in your lender.
Even if you don’t tell your lender you forgot to pay a bill or two, your carelessness might show up on your credit report. Missed payments are red flags that could ultimately cause your loan to be denied.
4. “I just opened several new credit accounts.”
It’s tempting to buy things for your soon-to-be new home, but it’s a bad idea to take on extra debt to do it. Your mortgage approval process might not go so smoothly if you tell your lender you’ve been applying for and accepting credit from a variety of sources.
A display of seemingly reckless behavior paints a picture of someone who might be irresponsible with their debt. Wait to make those big purchases until after you finish buying a home.
5. “My credit card is maxed out.”
Although small charges on a few of your credit accounts are understandable, a significant increase in the majority of your credit balances is not something your lender wants to see. It’s not unusual for a lender to run a final credit report within days or hours of closing to take a second look at your financial situation. Sizable amounts of new debt might change your debt-to-income ratio and cause the lender to change the terms of your loan or deny your application.
6. “I like to change jobs every year or so.”
A stable employment history of at least two years is a common requirement for mortgage lending approval, which makes sense because the lender is counting on you to reserve a portion of your income for your loan payments. If you like to change jobs frequently, you might not be able to make your mortgage payment at some point. And if your lender notes you have a spotty employment history, you’ll have some explaining to do.
7. “I’m considering switching from a salaried to a commissioned job.”
When you apply for a mortgage your current employment status is crucial. Loan approvals take time and life happens, so your lender might not bat an eye if you make a lateral move or get a promotion because it shouldn’t have a negative effect on your income. If you tell him you’re considering leaving your salaried job — which helped you snag a mortgage preapproval — for a job that relies only on commission, however, the deal might be off.
8. “My parents are giving me a cash gift for the down payment.”
Many mortgage lenders allow applicants to use a cash gift as a down payment for certain qualifying loan programs. Specific rules exist, however, which must be followed to properly receive these type of funds.
Before your mom or dad writes you a check, speak with your lender about the rules for receiving a cash gift as a down payment. Otherwise, your loan application might be rejected.
9. “What happens during foreclosure?”
If you’re asking questions about foreclosure during the homebuying process, you can expect your lender to think twice about approving you.
“Detailed questions regarding foreclosure procedures should be avoided, especially in the early stages of the mortgage application process,” said Rhett Struve, Realtor for Keller Williams Premier Realty in Lake Minnetonka, Minn. “Lenders will view this negatively because it displays a potential inability to make the necessary monthly payments.”
10. “What’s a credit score?”
Knowing what your credit score is and monitoring it on a regular basis should be part of your financial routine. If you don’t know what a credit score is, your lender might question if you’re prepared for the responsibility of a mortgage loan. Knowing what your score is and the reasons behind it are important so that you can make changes before you apply for a mortgage — and increase your chances of approval and a favorable mortgage rate.