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Everything you need to know when applying for a mortgage loan

While it’s exciting to start thinking about moving in and decorating after you’ve applied for your mortgage, there are some key things to keep in mind before you close. Here’s a list of things you may not realize you need to avoid after applying for your home loan.

Don’t Deposit Large Sums of Cash before buying a Boston condo

Lenders need to source your money, and cash isn’t easily traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.

Don’t Make Any Large Purchases before buying a Boston condo

It’s not just home-related purchases that could disqualify you from your loan. Any large purchases can be red flags for lenders. People with new debt have higher debt-to-income ratios (how much debt you have compared to your monthly income). Since higher ratios make for riskier loans, borrowers may no longer qualify for their mortgage. Resist the temptation to make any large purchases, even for furniture or appliances.

Don’t Cosign Loans for Anyone before buying a Boston condo

When you cosign for a loan, you’re making yourself accountable for that loan’s success and repayment. With that obligation comes higher debt-to-income ratios as well. Even if you promise you won’t be the one making the payments, your lender will have to count the payments against you.

Don’t Switch Bank Accounts before buying a Boston condo

Lenders need to source and track your assets. That task is much easier when there’s consistency among your accounts. Before you transfer any money, speak with your loan officer.

Don’t Apply for New Credit before buying a Boston condo

It doesn’t matter whether it’s a new credit card or a new car, when you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), it will have an impact on your FICO® score. Lower credit scores can determine your interest rate and possibly even your eligibility for approval.

Don’t Close Any Accounts before buying a Boston condo

Many buyers believe having less available credit makes them less risky and more likely to be approved. This isn’t true. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those aspects of your score.

Do Discuss Changes with Your Lender before buying a Boston condo

Be upfront about any changes that occur or you’re expecting to occur when talking with your lender. Blips in income, assets or credit should be reviewed and executed in a way that ensures your home loan can still be approved. If your job or employment status has changed recently, share that with your lender as well. Ultimately, it’s best to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature.

Boston Condos and the Bottom Line

You want your home purchase to go as smoothly as possible. Remember, before you make any large purchases, move your money around, or make major life changes, be sure to consult your lender – someone who’s qualified to explain how your financial decisions may impact your home loan.

Click to view Ford Realty Inc., Google Reviews

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Well, here’s just about everything you need to know about getting a mortgage loan, courtesy of the State of California’s Department of Corporations. The publication includes much more detailed information on each of these. I suggest printing it out and keeping a copy.

1) Do you represent a mortgage broker, mortgage banker or lender, consumer finance company, or a financial institution?

2) If working with a mortgage broker, ask: Are you licensed by the state?

3) What is the interest rate you are offering to me and is it a fixed or variable rate? Is this the best possible rate based on my credit score?

4) Are you locking my interest rate and, if so, for how long?

5) What would be my Annual Percentage Rate (APR)?

6) As a mortgage broker or banker, how much money would you be paid?

7) What other costs besides your fees will be associated with this loan?

8) What is the principal balance of my loan?

9) How much will the monthly payments be? Does this amount include escrow for property taxes and homeowner’s insurance or will I be responsible for paying these expenses on my own?

10) When would my payments be due? What is the grace period?

11) What is the length of the loan? Is there a balloon payment at the end of the loan?

12) Who would be my lender?

13) What are the chances that my loan would get sold?

14) If I pay off the loan early, would I be charged a prepayment penalty?

15) What is the appraised value of the property?

16) If I pay for the appraisal, how do I obtain a copy of it?

17) If I pay for the credit report, how do I obtain a copy of it?

18) Am I required to have Private Mortgage Insurance (PMI)?

19) Who are you planning on using as the title agency? Are you or your company affiliated with the title company? Should I purchase owner’s title insurance?

20) Who do I contact to obtain the closing documents for the loan 24 hours in advance of the closing?

Much more information is available in their publication, 20 Questions To Ask a Lender or Mortgage Broker

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Updated: Boston Real Estate Blog 2022/2023