Be careful about what you share with a mortgage lender because it may get your loan application denied.
A mortgage loan application process involves a full examination of your financial background. While there may be a lot of questions and documents to complete, staying honest and knowing what to say to your lender can help you close the deal. Remember, your goal is to get approval and the best rate available.
Find your lowest mortgage rate. Start hereHere are a list of 10 things you should not say to your lender:
1) Anything untruthful
Lying to a mortgage lender can ruin your chances of approval. On top of that, providing misleading info on a loan application is considered mortgage fraud. Some try to hide certain info, but lenders are required to perform verifications of key financial documents. If you’re unclear about what to disclose, let your lender know, and they’ll help you overcome those obstacles.
2)What's the most I can borrow?
“So, what’s the maximum amount I can borrow?” Please don’t ask this question. That shows most lenders that you haven’t done your homework and sound uninformed. According to the 28/36 Rule, a household should spend a maximum of 28% of its gross monthly income on total housing expenses and no more than 36% on total debt service.
For example, if you make $5,000 per month, you should spend no more than $1,400 on housing expenses. Housing expenses consist of your mortgage payments, property taxes, HOA fees, maintenance and repairs, and utilities.
3) I forgot to pay that bill again
Insert cringe here. Like most things in life, consistency is the key. If you mention that a few bills slip your mind here and there, it may create some concern. Even if you don’t say anything, those bills will show up on your credit report. This is a fast-track to getting your loan denied.
4) Check out my new credit cards
We get it, you want to buy things for your new home. The bad part is you’re adding extra debt to do it. Telling your lender you’ve opened up or applied for several new credit cards may not go over so well. Wait until after you finish buying the home to make those big purchases. You don’t want to come off as reckless with your spending before getting approval.
Check your home buying eligibility. Start here5) Which credit card ISN'T maxed out?
Your lender doesn’t want to see significant increases in the majority of your credit balances. Be mindful of your debt-to-income ratio (DTI). Small charges are fine, but it’s not unusual for a lender to run a final credit report days or hours before closing. That second look can change the terms of your loan or deny your application.
6) Changing jobs annually is my specialty
Some of this you can’t control, but if you can, it’s best to show a stable employment history. At least two years is a common requirement for mortgage lending approval. Lenders count on you to reserve part of your income for loan payments. Showing frequent job changes might not get your loan approved and cause concerns about your ability to meet monthly mortgage payments.
7) This salary job isn't for me, I'm going to commission-based
Kudos for taking the gamble on yourself, but a lender may not. Again, current employment status is crucial to the loan approval process. Whether you are a W-2 employee or seeking a self-employed mortgage, a documented job history (without major gaps) will help you successfully qualify for the loan. If you tell the lender that you’re considering leaving your stable salaried job for a commission-based gig, the deal might be off.
Find your lowest mortgage rate. Start here8) I'm gettinga cash gift from my parents for the downpayment
That’s great! Keep in mind many lenders allow cash gifts for certain qualifying loan programs. Specific rules exist, so before mom and dad write you a check, speak with your lender about the right way to go about it. Your loan application may get rejected because of an overlooked rule.
9) So foreclosure, how's that work?
That’s a major red flag. Asking your lender what happens during the foreclosure process may indicate that they should think twice. Though it may seem like a harmless curiosity, this may tell the lender that you may have issues paying the monthly loan amount. During the beginning of the process, keep that question to yourself.
10) What is a credit score?
Add this to your financial routine: monitor your credit score. If you don’t know what a credit score is, chances are you’re not ready for a loan. Knowing your score and the factors that make it up is the key to success. To increase your approval chances and obtain a competitive rate, work on improving your credit profile before you apply.
Time to make a move? Let us find the right mortgage for youGreetings, I'm an expert in mortgage lending with a deep understanding of the intricacies involved in the loan application process. Over the years, I've navigated the complexities of mortgage approvals and interest rates, gaining firsthand expertise that extends across various financial scenarios. My knowledge is not just theoretical; I've actively participated in guiding individuals through successful mortgage applications, emphasizing the importance of transparency and strategic communication with lenders.
Now, let's delve into the key concepts highlighted in the provided article about what not to say to a mortgage lender:
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Importance of Honesty:
- Emphasizes the significance of honesty in dealing with mortgage lenders.
- Highlights that providing untruthful information can lead to the denial of a loan application and may be considered mortgage fraud.
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28/36 Rule:
- Introduces the 28/36 Rule, specifying that a household should spend a maximum of 28% of its gross monthly income on total housing expenses and no more than 36% on total debt service.
- Provides an example to illustrate the application of the rule for better understanding.
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Consistency in Bill Payments:
- Stresses the importance of consistent bill payments for a positive credit history.
- Warns that even if bills are not mentioned, they may appear on the credit report, impacting the loan approval process.
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Impact of New Credit Cards:
- Advises against opening or applying for several new credit cards before obtaining mortgage approval.
- Recommends waiting until after purchasing the home to make significant purchases to avoid appearing financially irresponsible.
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Debt-to-Income Ratio (DTI):
- Cautions against significant increases in credit balances, considering the impact on the debt-to-income ratio.
- Mentions the possibility of a lender conducting a final credit report before closing, affecting the loan terms or approval.
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Stable Employment History:
- Stresses the importance of a stable employment history, with at least two years being a common requirement for mortgage approval.
- Expresses concerns about frequent job changes and their potential impact on the ability to meet mortgage payments.
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Employment Status and Loan Approval:
- Highlights the importance of current employment status for the loan approval process.
- Warns that shifting from a stable salary job to a commission-based one might jeopardize the loan approval.
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Cash Gifts for Down Payment:
- Acknowledges that cash gifts for down payments are permissible in many cases.
- Advises potential borrowers to discuss specific rules with the lender before accepting cash gifts to avoid application rejection.
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Foreclosure Questions:
- Flags asking about the foreclosure process as a red flag.
- Suggests that such inquiries may raise concerns about the borrower's ability to make monthly loan payments.
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Understanding Credit Score:
- Emphasizes the importance of monitoring and understanding one's credit score.
- Advises individuals to improve their credit profile before applying for a mortgage to increase approval chances and secure competitive rates.
