Empower Your Loan Agreements with Deal Qualification

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you so you're under contract and you're really excited about your new home however you're a little bit worried about what could happen to take somebody from being pre-approved to being denied for their mortgage loan we're going to talk about eight of the common reasons that people are denied in underwriting and possibly at risk of losing their earnest money if they don't have a finance contingency or if they don't find out in enough time and their finance contingency expires so i want you to be mindful of these eight things before you go under contract i'm shahida hill getting you over the hill to home ownership and helping you confidently buy your first home let's get into the eight items that i want you to be mindful of number one is a big one i haven't had a lot of people denied in underwriting and under contract but if they have been denied it's been because of this employment changes or the inability to verify employment so let's talk about employment employment is how you're going to be paying this mortgage the income that you receive from your full-time job maybe your part-time jobs maybe you're self-employed they're going to be looking at your employment as a primary source of you being able to pay this mortgage so when you're pre-approved they're looking at your check stubs and they're looking at your w-2s to see okay this is what this person makes every month every year and they have an ability to pay the mortgage now when you go through underwriting after you're under contract typically you are going to um they're going to look at everything with a fine-toothed comb so we've had instances where somebody has you know submitted pay stubs that they called the job and they didn't work there anymore so you need to make sure that you're being very accurate with what you submit if you quit your job and you shouldn't do that when you're buying a house but if you quit your job you no longer work there make sure you notify your lender and tell them what's happening even if it's a part-time job any income that you planned on using for being approved for this loan you need to let them know a lot of times people think oh well i'll put in my two week notice then i'll be closed but what if they call your job and this has happened before and they call their job and they realize you put in your two-week notice and you're not going to have a job after you close your loan can still be denied so losing a job quitting your job then finding out that you're not a remote worker and they thought you were especially if you're moving out of state your employer has to have you as officially a remote worker that can live anywhere if they haven't if your hr department wouldn't verify that you can live anywhere then that's going to be a red flag and they can deny your loan a lot of times people are also denied because they're contract workers and they didn't realize that up front so a lot of things in employment can change and don't think so say during your time under contract and some people are under contract for 30 days some people are building and under contract for six months so a lot of things can happen during this time if you're offered another position before you take it talk to your lender and this is why a lot of times people especially if it's paying you more a lot of people think that's not a big deal they're paying me more i should take this job but sometimes the new job may not be permanent or maybe a contract job or something along those lines you can still be denied because you went from what they consider to be a permanent full-time position to being a contract employee or a 1099 employee so if that even if it's for more money they may make you wait until you've worked in that contract position for a certain amount of time before they will approve your loan so be very mindful any employment change that you're thinking about making you want to be very mindful of speaking with your lender before you make any moves employment wise i've also had people who qualify you with um overtime so they qualified having overtime they called their job to see how often does this person work overtime and is it consistent the employer says no more than likely overtime will not continue because we don't need um any extra work workers right now and they were their pre-approval went to say 300 000 to 275 000 and those kinds of things will happen when they call your employer and start verifying employment so if you're making any employment changes make sure that you're speaking with your lender about it ahead of time so then there are no surprises as you get closer to closing because there could be if you're outside of your finance contingency if you have a finance contingency in your contract if you're outside of that you could be at risk of losing your earnest money so you want to be very mindful to let the lender know if you have any employment changes number two and this is common even though realtors will tell you lenders will tell you do not apply for any credit any additional credit a lot of people while they're under contract they might buy a new car they'll start buying furniture on credit appliances on credit do not buy anything on credit and definitely don't open up any new credit accounts a lot of people are denied in underwriting because they bought additional things that increase their debt to income ratio or decrease their credit score because they've had those hard credit pulls on their credit before you do anything with new credit or new debt you need to talk to your lender avoid it altogether but definitely talk to your lender first if you really want to buy a home number three missed payments on debt this happened to one of my subscribers who emailed me they were under contract for new construction the husband missed one payment one payment on a credit card it drastically dropped their credit score and they no longer qualified for the loan and that was just devastating for them but those types of things people because there's so much going on it they they had the money but they missed the credit the payment so what you can do is go back to your lender that's what they were trying to do to go back to their creditor to have them remove it from their credit account but it happened like right before closing or a couple of weeks before closing and they weren't able to do it in time so you just need to make sure that you're being very very organized once you're under contract and make sure you're not missing payments on any of your debt because they're always looking and they always can pull your credit profile your credit again to see where you are especially if you're building new construction could be again four to six months and you're wondering okay you could a lot can happen in four to six months so you want to make sure you're paying all of your debt on time because if they pulled your credit during the pre-approval process they're definitely going to pull it again later on they're not going to assume that you're in the same place that you were before so just be mindful of that number four we're halfway through the list number four undisclosed debt and the big thing you're thinking well they have my credit report so they see my debt but some of the debt they may not see or some of the obligations that you may have to pay is child support alimony or you owe the irs those things pop up a lot so for example child support necessarily does not show up on your um your credit report and the irs debt typically doesn't show up on your credit report so the underwriter will see this when they're going through either your bank statements your check stubs they'll see these payments being made ever so often and they say okay you have a child support payment then they'll add that to your debt to income ratio or they'll look at your last two um your last two tax returns and if you had a balance owed to the irs they're going to ask you for the proof of payment and if you're on a payment plan and that wasn't disclosed to them up front now that debt gets factored into your debt to income ratio and sometimes they don't want you to be on more than sometimes depending on the lender they'll allow you to be on one payment plan for like the previous the year but if you're on multiple payment plans from you know multiple years that might be an issue and your loan will be denied so if you have any of those debts i advise you or chat or obligations such as child support or alimony you need to disclose that up front because they will find it typically on your bank statements or your check steps or just looking and asking questions about where some of your other money is going um that's coming into your account number five so one of the things that you'll have to do once you're under contract is quote for homeowners insurance and when they initially there's gonna be two together homeowners insurance and hoa so one of the things you're going to have to quote for is homeowners insurance and then another thing that hasn't been factored in is if you're going to buy a home in an hoa community so homeowners insurance say that quote comes in really really high that may bring the your mortgage payment higher than your pre-approval so you want to be mindful of that and get that homeowners insurance quote in as soon as possible so you know how much it will be because prior to to you being under contract they were just estimating the amount of homeowners insurance they didn't know exactly what it would be and if the seller of that home has had a lot of home insurance claims that can impact your future homeowners insurance payment and it's hard to know that until you actually are under contract so just make sure also in the seller's disclosure typically they will tell you how many insurance claims they have filed so that's something you could you know look up or have the lender look up if it's going to be higher and then lastly the hoa for number five hoa what if you're hoa if you're doing a town home or another community where that monthly payment is too high and that takes you above your pre-approval amount so those things can cause you to be denied for that home once you're already under contract so those are some things you can talk with your lender ahead of time so you can estimate where you need to be for hoa and homeowners and homeowners insurance ahead of time all right if you have if this is your first time here three more left but if this is your first time here please like and subscribe to my channel for new videos every week number six appraisal comes in short so your appraisal the home the lender is only going to lend you the amount that the home appraises for and you don't get an appraisal typically until you're already under contract and the lender sends an appraiser out so if that appraisal comes in below your contract price you can still negotiate with the seller to come down on that price you can negotiate with the seller to pay some of the difference you can negotiate something but what if you and the seller can't work something out then that loan will be denied because you haven't made an amendment to the contract price so just that's one of the things that could happen um so make sure you have an appraisal contingency if you plan on getting your earnest money back seven funds to close do you have the funds to close and do does the lender require you to have any funds on reserve this has been an issue for some people that didn't realize with their lender they had to have some money in reserve like a certain amount of mortgage payments saved in the bank separate from their down payment and separate from their closing costs you need to ask your lender this up front do i have to have or am i required to have any funds on reserve i know i had one client that needed they were like 50 something dollars short of the funds they needed to have in reserve and they didn't realize that um they were able to close they weren't gonna not close for fifty dollars but that was an issue like two days before closing that they didn't have the exact amount um in reserves in in their bank account so just want to make sure is does your lender require you to have any reserved funds in your account that will be left after your down payment after your closing costs do you have enough money to close are you do you have any um unseasoned what they call like you know deposits that are not coming from your employment do you have any recent cash deposits that were in your bank account that they can't um they can't so um they can't source that's the word i was looking for they can't source the funds so you need okay because this is what will happen oh your uncle says well i'll give you five thousand dollars to help you with the down payment you deposit that five thousand dollars into your account now the lender sees that underwriter sees that and they're saying where's this five thousand dollars coming from if you're not allowed or if you haven't um said that you're using gift funds they don't want to see that five thousand dollars in your account because they may say maybe you maybe your uncle loaned you that money and now that needs to be added to your debt to income ratio so you need to make sure that you don't have any large cash deposits into your bank account before closing check with your lender to make sure before you deposit anything and i've had like my clients email me well um what's gonna happen if i put twelve hundred dollars in my account before this time and i said where are you getting the twelve hundred dollars from can you source it you need to just make sure talk to your lender about it to make sure that you can source where that money is coming from and number eight and the last one this is not as common but occupancy fraud so most loans most owner occupant loans so fha um low down payment like five percent three percent down conventional va loans usda loans there are owner occupied mortgages so the lender is expecting you to be living in this house that's a lower risk to them than you being a non-owner occupant okay so they allow you to have a lower down payment for being an owner occupant now somehow the lender could find out that you don't plan on occupying that home so in the past what will happen is the sell the buyer will get their home owner's insurance and instead of getting a owner's policy they get a landlord's policy and then the lender may see that and say okay why are you getting a landlord's policy don't you plan on occupying this home so just make sure that you are not doing things like this to um get your loan denied and i want to give you three things that if you're thinking about um if this worries you like getting your loan denied at the last minute three things that you can do one find a lender that will take you through underwriting first okay before you're even under contract they'll take your loan take all your documents through underwriting first so you can get everything approved before you get under contract number two don't hide things from the lender assuming that they don't find out they do find out and then you are at a loss because you've already put money up you've put money at risk especially if you have earnest money and that sort of thing make sure you just disclose things to your lender i'm sure they've seen it all before it won't surprise them but a lot of people think well they may not see it or how will they see it generally speaking they see it and then lastly if you're unsure about some things make sure you're getting a long finance contingency or long enough so you can get through underwriting and so if you find something that will make your loan you know result in your loan being denied you can still get your earnest money back i hope this was helpful thank you so much for watching please like and subscribe to my channel for new videos every week