There's nothing worse than talking to a prospective client who is already under contract to buy their dream home, pulling credit and discovering they do not qualify for a home loan. Too much debt, prior identity theft, unacceptable sources of funds to close, etc are just a few of the issues that can arise that may cause potential home buyers undue stress. The number of people that call to get pre-approved for a home loan AFTER they are already under contract is shocking. Shocking that their Realtor did not require it before they spent hours showing them a million houses and shocking that the buyers are that confident in their ability to get the loan even though they have $5 to their name (not a joke). Maybe because I am in the biz and know all of the potential pitfalls do I have a very different outlook. For those that want to avoid heartache or streamline their mortgage loan process, here are some tips:

1. APPLY EARLY! You never know what type of inaccuracies on your credit report that could cost you $1000's in the long run. Lower credit score= higher rate/higher insurance premiums. You want time to get credit corrections made on the repository (Equifax, Experian, Transunion) level. Maybe you have too much debt. If you apply early enough, you might be able to get advise on adjustments you can make. Maybe you could pay down an installment loan (auto, personal/unsecured, student) down to less than 10 payments remaining for a conventional loan to help lower your debt ratio (conventional loans do not count installment debt with 10 mos or less in remaining payments. Government loans are different). Less debt=More home you can qualify for. Maybe you could pay down a credit card to under 50% or 20% of credit limit to increase your score. There are so many tricks of the trade and if you apply to late, you will not have time to take advantage of your loan officer's knowledge. 

2. Know where your money to close on the home is coming from. Really. Where do you plan on getting the money?! Almost every loan requires some sort of down payment and then there are closing costs and pre-paid charges on top of that. If you have no money in the bank, get started on physically receiving the money you will need to close. Are you getting a gift from family, pulling from retirement, taking from a credit card (ugh, I know but many try this). Some sources of funds are not acceptable. You can't just show up to closing with $20,000 and the lender be cool with that. The documentation process to get a mortgage these days is NUTS! Get ready to give everything but a blood sample! If you have this discussion well in advance with your loan officer you should be able to avoid some really annoying documentation requirements (like getting a bank statement from the person gifting you the money for closing. I will tell you now, gift donors HATE to give up their bank statements). Unless the money has been sitting in your checking or savings for more than 3-4 months, you will WANT to have the convo up front!

3. Self-employed borrowers tend to overestimate their qualifying income. In turn, they think they qualify for more than they actually do. You really do not want to "ballpark" your qualification. Lenders are required to deduct and add back certain line items from the tax returns. Maybe you have ownership in a side business and typically think nothing of it since you are not involved in the day-to-day activity BUT you did get a K-1 with a $12,000 LOSS. Yes, the most certainly effects your qualification. It's very common for people to do things as a hobby but yet write it off on their tax returns. Lenders have to consider all of that. They have to try to gauge your risk of default. If you are shelling out $24,000/yr of your salary on selling skincare on the side, that is hard to ignore and could keep you from getting into the house you really wanted.

4. Do not go debt crazy before and during your loan process. New house means new appliances, home decor and new car right?! I swear peiple think new cars and houses must go hand in hand. WAIT! We all know you "need" new stuff for the house but for the love of God WAIT until you own the house first!! Please. I beg you. Lenders pull a refresh credit report as close to the day before closing and if you have any new credit inquiries or debt, they will be all over you to make sure they document the new debt and that you still qualify for the loan. It is heartbreaking to tell someone they cannot buy the house because they just HAD to have the new fridge and stove and patio heater. Yeah. 

5. Try to avoid any major employment changes until after you own the home. Lenders like to see that your employment/income is stable and likely to continue. When you have a history of job hopping, the stability is hard to believe. Again, if you apply a year or six months early, this can be discussed with loan officer to determine best route. 

6. Choosing a lender without shopping around. You want to feel comfortable with your team. Now I would not recommend working with a certain loan officer for six months and then jumping ship after they helped improve your score. Call and have some conversations with a few loan officers and formally apply. See what they have to say. I will also tell you to go with your gut and if it seems too good to be true then it is! MOST lenders offer the exact same products (unless it is a bank that is offering a portfolio product which is a loan they will service). Compare rates vs fees of each lender. Every borrower is different on what is more important to them at that moment but some options may cost your $10,000's over the life of the loan. Not all loan officers are created equal. I can say that because I have worked for all types. There are some that talk a good talk but that's where it ends. Ask questions. Do a little research on your own. Ask around. 

I hope these tips are helpful to anyone thinking of buying in the future. I cannot stress the importance of getting started early.  You want to enjoy buying a home as crazy as that may sound. It can really be exciting over stressful if you plan ahead!