Home > Mortgages > 5 Things That Can Kill Your Mortgage Application

Comments 0 Comments

Getting a mortgage can be no small task. These days, borrowers have to meet stringent income and credit requirements to get a lender to finance their new home. But even with proper documentation and a stellar credit score, the process can go awry.

Here are five things borrowers still do that can make getting a mortgage more dicey.

1. You Co-Mingle Extra Family Funding

Let’s say your family is helping you buy your home. Many borrowers may instruct their relatives to send the funds directly to their personal checking account — the same one you pay your monthly bills out of. But doing so can look on paper as though you are spending your down payment. The least path of resistance approach could be to have your family benefactor wire the funds directly into escrow. The escrow company is required to hold these gifts for you until closing, at which point those funds become a credit against your cash to close.

2. You Try to Pay With Undocumented Cash

It may be a good idea to keep any cash from “side jobs” out of the loan process. Undocumented money cannot be used towards income verification or a down payment. The bank will ignore any funds that are not substantiated. They do not readily make loans to mortgage borrowers who deal primarily in cash.

3. You Continue to Apply for Credit

Once you have picked a mortgage company and begun the loan process, it’s best to stop shopping around for other types of credit. Even if you get a great credit offer, such as an auto loan with interest-free financing or a 0% balance transfer credit card offer, applying for credit (or worse, taking on new debt not previously disclosed to your mortgage lender) could negatively impact your loan. It’s better to go credit-dark by not opening any new accounts.

You may also want to refrain from closing and/or disputing any credit accounts without the guidance of your loan professional. You can check your credit report for free once a year at AnnualCreditReport.com or see your credit scores for free each month on Credit.com to see how your credit applications are affecting you.

4. You Don’t Respond to Your Lender’s Requests

Lenders understand you are busy, but so is everyone else. Moreover, you should try to manage your time accordingly to account for taking on what could be the largest liability of your life. Timely, regular communication within the mortgage loan process is crucial especially if you’ve decided to lock in your interest rate.

A mortgage rate lock commitment is usually good for 30-to-45 days, sometimes longer depending on circumstances. This means the clock begins ticking from the time you agree to the offer and you could wind up paying thousands of dollars in extension fees if you take too long to provide the necessary paperwork.

As a side note some mortgage companies do not allow you to extend your interest rate lock, but rather force you to take worst-case market pricing. You may want to ask about your lender’s rate lock policy before you apply for the loan.

5. You Can’t or Won’t Provide Additional Documentation

Every single residential mortgage loan entails submitting an application and financial documentation to an underwriter for review. Every reviewed loan comes out approved with conditions or suspended (needing more information or a change before final approval).

These conditions might involve explaining previous addresses, providing updated pay stubs, or requesting employment verification, but there could be many different reasons why an underwriter needs to see more. Lending is pretty specific in terms of qualifying. More often than not, refusing to provide additional documentation or turning over documents the lender did not specifically ask for makes the mortgage process take longer and causes more stress and frustration for both parties.

Simply put, if the lender is asking for something, it may be easiest to provide it in lieu of fighting the request or providing some other form of documentation that is likely to prove insufficient.

Overall, it’s often best to acknowledge there could be things requested in the loan process that seem annoying, frustrating, redundant or tedious. However, getting information back to the lender within 48 business hours helps meet your closing time frames.

More on Mortgages & Homebuying:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team