February 9, 2021
Do you need to buy a home with an FHA mortgage? Or refinance your existing loan? There are some financial issues to be mindful of going into a new loan application–don’t let a lack of information derail your mortgage loan process.
Mortgages and refinance loans don’t have one-size-fits-all solutions; in the same way you have many housing choices there are also many different kinds of mortgage loan circumstances.
When your loan application comes in, the lender has to make sure the loan will be a good credit risk. To be approved, your application requires your tax returns, bank statements, and other financial data. The lender reviews these ahead of loan approval.
And some issues can create more problems for the lender than others at first. For example, what happens if your loan officer finds a monthly financial obligation in your bank statements–one without a clear payee? This could create a mystery for the lender that could affect loan approval.
In these cases, there may be a private debt you are paying on–mention such debt upfront and explain these payments to your lender in advance.
And what about applicants with bank statement records of large deposits from “mysterious” sources. When there is no clear indication of where a large deposit is from it makes a challenge for your loan officer, who is required to verify the sources of money used to make the down payment.
FHA loan rules in HUD 4000.1 say that down payment money cannot come from unapproved sources; an unexplained deposit from an unknown source could be used to make the down payment. The lender will need to know exactly where that money came from.
Home loans require the lender to make sure the applicant is dependable with financial obligations, but that’s not all. The lender must also ensure you have enough money left over at the end of all your regular financial obligations to pay your mortgage.
The best time to address these issues is before you even fill out a page of loan paperwork–have your information ready, fully read and understood, and be sure to address any issues that might be associated with your payment record, deposits, etc. BEFORE you apply for the loan.
Making your loan application “bulletproof” might not be possible, but you can get yourself a LOT closer to loan approval; don’t miss any payments for 12 months or more before you apply and be sure to explain anything on your bank statements or tax returns that might help the lender get closer to approving your mortgage.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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