Maybe you’ve heard horror stories about mortgages gone wrong—particularly when mortgages don’t close quickly.
Homebuyers stuck in living-in-a-hotel-limbo because they underestimated the length of time it would take to finalize their mortgage. The seller who backed out of a deal because the buyer’s mortgage lender was taking too long. A delayed application leading to higher interest rates, pushing a monthly mortgage payment up from tough-but-doable to just-out-of-reach.
While these experiences are rare, delays in your mortgage approval can certainly make your homebuying experience frustrating.
Thankfully, most delays in closing a mortgage can be avoided or minimized with a little bit of effort and preparation. So if you’re in a hurry to close on your new home, here are some steps you can take to make sure your mortgage closes on time.
Check Your Credit First
Before you start looking for your dream home, you should take a good look at your credit scores.
Get copies of your credit reports from all three of the major credit reporting bureaus. Review the reports carefully. High balances on credit cards or other debt can lower the size of a mortgage a lender would be willing to give you. Missed payments or delinquent accounts could mean you’ll pay higher interest rates or (gulp) be denied for a mortgage entirely. Even relatively benign errors like an incorrect former address could potentially slow down your mortgage application.
Something like 20% of consumers may have inaccurate information on their credit reports, so the chance that your credit history contain some errors is higher than you might guess.
If you spot any untrue negative information, start by filing a dispute with the credit bureau in question. (You may also have to take up the issue with your creditor, but start first with the credit bureau: ultimately, the credit report maintained by the credit bureau is what needs to be fixed.)
Whatever you do, resolve the issue before you apply for a mortgage. Any item on your credit reports marked ‘disputed’ will need to be resolved before a lender will approve you for a mortgage. And if you choose to pay down some credit card balances to improve your mortgage prospects, make sure the lower balances are reflected on your credit reports before applying for a mortgage—there’s no sense in dumping cash into paying off balances if you don’t also wait for that information to be reflected on your credit report, where mortgage lenders can see it.
Being organized and well-prepared is the key to so many of life’s biggest challenges, and getting a mortgage is no exception.
The exact mix of documentation you’ll need to provide in a mortgage application can vary a bit from lender to lender. (With Morty, there’s just one application to view offers from our full network of lenders: but if you were going to multiple lenders individually, you could expect to fill in similar-but-not-identical applications with each one.)
Basically, you’ll need to have documented proof of your identity, along with your income, assets, and debts. Common requirements include a few years of W-2s and tax returns; a few months of statements for checking, savings, or investment accounts; and titles and information on any property you currently have. (You can look at our detailed document checklist here when you’re ready.)
Remember that the documentation requirement applies to any co-borrower as well—you can’t add your wife’s income to your mortgage application without her social security number or her bank account data, so you two will probably want to work on the application together.
Discrepancies between what you say about your financial situation and what your documentation shows will cause delays in your mortgage being approved. Even relatively minor disparities can hold up the show, so it’s important that what you put on your mortgage application matches any documentation you provide. Inverted numerals in an account balance or account number can cause delays.
And of course, it goes without saying that purposefully fudging numbers anywhere in your mortgage application can lead to your mortgage being rejected entirely, or worse, even if you aren’t asked to back up a particular claim or figure in the application initially.
Don’t Make Any Sudden Moves
Buying a home is already a big life change. Do your best not to make any other big changes in your life while your mortgage application is in process.
Changing jobs, applying for new credit cards, making a big purchase, missing a bill payment, or filing for divorce can grind the gears processing your mortgage application to a full halt.
Yes, you’re probably already scouting out candidates for the table and chairs you’ll need for your new formal dining room. Or perhaps you’re planning to purchase a more fuel-efficient car to drive your soon-to-be longer commute to your job.
But if you make any major purchases that affect your credit score or assets, you could potentially spook your underwriters. Minor changes may simply delay your application, but big changes can send you back to square one.
Of course, life happens, and some major changes can’t be avoided. But do everything you can to remain on a level course, at least until after you’ve closed on your new home.
Be Ready to Answer Questions and Provide Additional Documentation
Mortgage lenders don’t want to lose the money they lend you to purchase a home, so all mortgage applications go through an underwriting process.
Basically, underwriters make doubly sure that your mortgage meets their lending guidelines, and that giving you money won’t pose an outsized risk to their bottom line as a bank or lender.
And that means that a lender is going to go over the information you submit with your mortgage application very, very carefully. If an underwriter finds anything amiss with your application, she will wait to move forward with approval until she’s satisfied that her questions and concerns have been answered.
If you’ve heard from friends and family about mortgage application nightmares, chances are good that the trouble happened during the underwriting part of the mortgage process. But underwriting shouldn’t scare you as a homebuyer. Just recognize that there’s a very real chance you’ll for additional information to support or clarify details you submitted with your mortgage loan application. The trouble happens when homebuyers are unprepared for questions, or unable to provide verifying documentation.
You may be able to anticipate some questions in advance. If your income is from a source that isn’t a traditional W-2 employment arrangement, you’ll almost certainly be asked for more details about your business. If your Aunt Mildred gave you a large sum of cash recently, you may be asked to produce a letter from Mildred in which she confirms that the money she gave you to put towards your down payment was a gift and not an informal loan. (Thanks, Aunt Mildred.)
Some requests from underwriters may be difficult to anticipate, and that’s all right, too. To expedite your mortgage application’s journey through the underwriting process, all you really need to do is be available and responsive to questions from your lender. If you are asked to provide additional documentation, the sooner you do so, the sooner your application can be approved.
Mortgage applications are pretty straightforward, even if people’s finances are often a little complicated. Not every delay in a mortgage approval can be avoided, but if you follow these tips, you’ll be well on your way to ensuring that your homebuying story is a short and happy one. (Ready to get the ball rolling on your mortgage now? Head over here to get your Morty profile started.)