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The Basics of Mortgages
Mortgage Approval Pointers
There are many factors which play a role in determining whether a bank will approve you for a mortgage. These pointers will help you plan for the mortgage pre-approval and ultimate approval process:
- Improve your credit. Higher credit will qualify you for better rates which will save you money. Credit improvement will be the subject of another Hub.
- Collect your income information, assets, and liabilities in one handy place.
- Establish a good relationship with a bank or a specific mortgage officer.
- Take advantage of "bundling" your accounts at one financial institution for better rates and other discounts in the mortgage process.
We will unpack these pointers for you and provide some specific information to assist you.
Assembling Your Financial Picture for Mortgage Approval
The bank will require information on your income, assets, liabilities, and history with complete supporting documentation. Sometimes, if too much time elapses between pre-approval and closing, you will be required to update the information again. This results from excessive regulation from legislators / blow-hards in the wake of the financial meltdown. Keep all the following information and documentation in one, readily accessible place.
- Income - gather all information regarding your income. This includes pay stubs, past tax returns, rental incomes, dividends, side-hustles, or any other incoming money.
- Assets - this includes bank accounts, Certificates of Deposit, investment accounts, real estate holdings or anything else which factors into you net worth.
- Liabilities - Loans, credit cards, and other debts owed.
I keep a folder with this information included. It saves time and effort when loan application time arrives.
Make Buddies with a Bank
The old adage "it's not what you know, but who you know" rings true in every aspect of life. Applying for a mortgage loan is no exception. If you establish a friendly, working relationship with a bank and know specific people at the bank who can help you when the time comes, it can make a world of difference in obtaining speedy mortgage approval. When you call to let them know you need to close within a short period of time, they will be able to provide assistance and perhaps make a phone call to underwriting to get them to quit dragging their feet. It doesn't hurt to have significant funds on deposit or invested with the bank either. However, it is not necessary. A friendly relationship can go a long way.
Bundling Accounts at Banks to Get a Better Mortgage Rate and Waive Fees
Many banks offer reduced or fully waived origination fees and/or appraisal fees along with reduced mortgage interest rates to premier customers. For example, if between your deposit accounts, investments, and other loans, you reach a certain threshold balance, let's say $50,000, you get certain benefits like increased credit card points, savings interest along with perks on the mortgage. Thus, it can pay to bank with one single financial institution and bundle all of your accounts with them. If the bank discounts your mortgage interest by 0.25%, that can have a substantial impact on your monthly payment amount and can save you thousands of dollars per year.