South Bend Home Loan

Monday, April 15, 2013

Three Mortgage Migraine Makers

Sometimes the mortgage approval process is easy and smooth for the home buyer.  Sometimes it is not.  When it is not, there is typically one of three culprits that is causing the headache.  

Culprit #1 - Show Me The Money

“Why does it matter where the money came from if I have the money??”  Countless home buyers have asked me this, and it’s a valid question.  Unfortunately, when it comes to getting a mortgage loan approved, the bank not only wants to know THAT you have the money, they want to know where that money came from.
 Your lender is typically going to ask for your last two months’ bank statements.  She will then look at every deposit showing on that statement to see what it is.  If it is the direct deposit of your payroll, no problem.  If it is a smaller deposit (typically under $250), that’s fine.  If you have deposits that are not small or are not a direct deposit of pay though, the lender will want a signed letter from you explaining what the deposit is and a copy of the deposited item or some other documentation to show the source (a check stub, expense report, etc.).

These items are typically obtainable by the home buyer but it can be a hassle.  Odds are you didn’t keep a copy of the check that your bother gave you two months ago for his half of dad’s birthday gift, right?  Your bank can likely print those items out for you if needed (some charge a fee).  If you’re lucky, your bank will automatically scan all your deposited items in and have them available online as a part of their online banking, making it easy for you to print them out.  Easy or hard, though, you will have to get those for your lender so be prepared for that and keep copies as you go if possible.

Culprit #2 - A Little Me Time 

It’s not uncommon for people to take unpaid time off.  Vacations, family situations, or even just a little ‘I need a break’ time is all a part of the rhythm of work and life.  When the bank is looking at your pay stubs, though, they’re looking for consistent hours.  If you’ve had unpaid time off in the last month, the lender is going to need to find out if this happens often so that she can calculate your income correctly.
To verify this, the banker will probably need to send a form to your employer to fill out.  You also might need to write a letter explaining the unpaid time off and clarifying if it is a repetitive thing. If your employer doesn’t return the form promptly, you may need to get involved to encourage them to get it back to your lender.
All of this is more work for you and your lender.  As best you can, try to avoid unpaid time off in the months leading up to a home purchase.  You’ll likely want to save that type of time for once you’re a home owner anyhow, because there’s ALWAYS stuff that needs done then!

Culprit #3 - 'Close Enough'

Your lender is going to ask you for a lot of paperwork.  You might go through the list, gather up most of it and then decide “That's close enough”. 
'Close enough' is not good enough.  The lender needs everything she asked for.  If she asked for all pages of your bank statements and one page is completely blank, she needs that blank page.  If the lender asked for your full federal tax returns and you think the first two pages provide enough information, it doesn't.  She asked for it all because she needs it all.  Giving the lender just part of what she asked for will just make the process more frustrating for you because she will come back and ask for the rest.  Make life easier for you and your lender – give her everything she requested upfront instead of hoping that 'close enough' will work.

In Summary

Buying a home is an exciting time but the fun can evaporate if you're constantly dealing with stress from the mortgage process.  Knowing these top three mortgage migraine makers and how to avoid them, though, should help keep the enjoyment in the experience of home buying.  Good luck!