A real estate transaction can be a very complex and complicated process, but it can be even more so if a borrower is dishonest with their mortgage lender about anything to do with their finances. It behooves you to be upfront on your mortgage application about any foreclosures, liens, delinquencies, or any demerits your account may reveal. This is also the case with income. Thanks to a recent change in regulations, a lender cannot require for you to submit your financial documents up front as a part of the application. They can strongly urge it, but cannot require it. It's in your best interest to provide them when they mention them. You might think it's an invasion of privacy, but you're going to have to submit these documents anyways. Might as well do it in advance. Please be honest with the lender. Why? You're about to find out.
For starters, it speeds up the process for you. By sending in the documents up front, it allows the lenders to go through all your finances and pre-approve you before even finding a house to make sure you actually do qualify for the loan instead of just a pre-qualification (remember the difference?). This will cut down the chance of you getting close to closing, and the loan falls through because you weren't honest about where your money came from or how much money you actually made, or something else. The lenders are going to verify all of your documents during the process, but is it worth it to lose your earnest money, option money, appraisal fee, inspection fee, and sanity because you didn't do this up front and tried to hide something? I think not.
By having a pre-approval letter instead of a pre-qualification letter, it lets the listing agent of the home you've made an offer on the lender has already reviewed all of your financial documents and it's been proven you qualified for the loan instead of them just taking your word for it. This allows the lender to close much faster on your loan than starting from the beginning, and some sellers are much more apt to take an offer which is the shortest closing time. I have lenders who have closed in less than two weeks because of a very upfront borrower. In a time where multiple offers are the norm, take it upon yourself to get ahead of the game.
Nothing To Hide
By sending in all your documents up front, the lenders will be able to dissect your financial portfolio. Scary, right? It's scarier if you do this too late. They'll be able to tell you exactly what you qualify for, if you qualify. If you don't, they'll be able to tell you what's hurting you, how to correct it, and assist you along the way by doing futuristic scenarios. Keep in mind it's often not the lenders who are requesting extra documentation, but the underwriters. In two situations in the past two years, I've had a buyer try and lie to a lender and had the loan denied as a result of what they were hiding. One tried to hide four pages of a tax return showing a $72k loss on a business, which affected his ability to get the loan on a house he was trying to buy. Lost the house, lost all the monies discussed above. Another buyer tried to lie about how much money they made. A verification of employment by the lender showed they hundreds less per month than stated. Another lie, another failed mortgage. All secrets come out during the process, so be honest up front.
Don't get upset if the lenders keep asking, or can't qualify you. Every lender has to abide by the same mortgage regulations, but not all lenders offer the same loan products. There's the usual few programs everyone has, but there are several lenders who offer specialized products (like the First Time Home Buyer program). I know lenders who do these special loans, so make sure to ask.
So if you're in the market to buy a home, Contact Me Today! I can help you get set up with mortgage and insurance people to make sure you're able to buy a home and have the best coverage.
You can also get a copy of my Home Buyers Handbook when buying to learn about the process!