Get ALL the documentation to your lender as soon as possible.
Your lender will need your last two Federal Tax Returns, your last two years W-2s, last two bank statements, and your photo ID.
Let me clarify that a bit: That means ALL of the federal tax return – not just the 1st page or two. It also means ALL of the W-2s – including that one for $217 for a weekend job you had. It means ALL pages of your bank statements including that page you used to balance your checkbook and the one that says “this page left intentionally blank.” I know it sounds absurd to ask for things that have no information, but remember the underwriter doesn’t know that. If a bank statement says “page 1 of 6” and you only give five, they will want to know what is on page 6 that you failed to give them. If the W-2s you gave the lender don’t add up to the total that appears on line 1 of the Federal Tax Return it will be a problem. Loan underwriting today is closer to an audit than just trying to determine if you are a good credit risk, and the consequences of making a mistake can costs the lender thousands of dollars.
That’s just the basics; there will invariably be more, but the sooner you get these documents to the lender the sooner you will know what else is needed. Oh, and get the follow-up documents to your lender as quickly as possible for the same reason. It’s pretty common for a document to open a can of worms that needs to be addressed. The sooner those worms are dealt with, the better.
Be accurate with what you tell your lender.
There is an expression in the lending industry that “buyers are liars.” I don’t believe this, but I DO believe that buyers sometimes don’t understand how important accuracy is to our business. We really do need to know EXACTLY when you moved into your house, EXACTLY when you left your last job and started your current one. As crazy as it seems, what your job title is can be a really big deal on a loan application.
Here’s why this is so important: If you give an “estimated” date for when you left an employer and our verification indicated something different, it could be significant. Having two months between jobs might be OK, but if it’s three months that could be considered an unstable job history. If the credit report we run shows an address that you didn’t indicate, or that you used an address at a time you indicated you lived someplace else, it could be a big problem. These innocent inaccuracies can be seen as attempts to deceive the lender – and they don’t like that.
Don’t’ leave out important information.
Failing to mention former names, child support payments, property you own, businesses you are involved with, etc. USUALLY get discovered sometime during the loan process. I have seen a child support lien, filed just days before escrow was supposed to close, kill a deal and an undisclosed ownership in a home business get a loan denied.
Get approved before you look for a house.
There are two reasons for this. The first is to make sure that all of the potential problems on your loan are addressed and dealt with. The second is so the only things that need to be done on your loan have to do with the property and your contract.
Make sure your lender and real estate agent talk before your offer is written.
Different loan types have different requirements, and writing the offer incorrectly may cause a huge problem down the line. Things like, are all of the people on the loan on the contract? Who is paying what costs could be a problem if the borrower’s cash is tight. If inspections are called for the lender will typically want to see those reports – and see that there are no problems. Anytime a contract needs to be changed to meet a lender’s requirement there is the chance the seller will not comply with the request, and may even use that that opportunity to back out of the contract. This is especially true if someone had given them a better offer after they accepted yours. It’s much better to get it right the 1st time.
Don’t change anything! (See my post “20 ways to screw-up your loan application.)
People always want to know how long the pre-approval is good. The real answer is until something changes. Spending money, moving money, buying something, changing positions within a company (not to mention changing employers,) etc. all essentially change the loan application which means the loan approval is no longer valid. Any change from what was approved could be a problem by delaying the loan process while the change is addressed to potentially causing the loan to be denied.