You know the saying “the devil is in the details”; well it applies to the mortgage process too. When you’re buying or refinancing a home, usually it’s the big stuff like income, downpayment, and credit that can cause the most anxiety and as a result, the small stuff can sometimes get overlooked. Instead of having to go back and forth trying to satisfy the lender requirements, reduce the work by checking out these 10 tips for a stress-free closing.
1. Provide the explanation upfront
If you think there may be any blemishes on your credit report, provide the explanation upfront as this information is useful when structuring your application for submission to a lender. Your potential lender will be analyzing your credit report and if your mortgage specialist has already provided a credit explanation upfront, this will speed up the approval process. This tip can apply to other areas of the mortgage application too, so be sure to have a detailed chat with your mortgage professional as they will be able to separate the “nice to knows” from the “need to knows”.
2. Label everything you submit
When sending in any kind of documents, make sure you clearly state what is what as this will reduce review time for both your mortgage professional and the lender when the documents are received. Coupled with the tip above, labeling and providing an explanation upfront reduces the back and forth sometimes required.
3. Make sure your name is on everything
The documents you send to the lender must show you own them, especially when it comes to downpayment confirmation. For funds from your own resources, ensure your name is somehow connected to the account statement, and a handwritten name doesn’t count. Your income documents will likely have your name on there already, though pay attention to the other documents you send in to ensure they can quickly be reviewed and accepted.
4. Commit to an account
This specifically applies to downpayment funds from your own resources. Your lender will request a transaction history (usually the most recent 90 days) of your downpayment funds in order to ensure they have accumulated over time. If there are any large deposits ($2500+, depending on the lender), you will be required to provide a paper trail for those funds as well. Try to reduce the amount of transferring between accounts in order to reduce the amount of paperwork you will be required to provide.
5. Read the fine print
Before you sign any documents, starting with the mortgage commitment, ending in the final documents at the lawyers, be sure you read the fine print. It’s better to understand the details now than be blindsided later. The lengthier blurbs are where the meat is, like pre-payment privileges, payout penalties, document requirements and payments dates, etc. As each lenders approval document are different, don’t hesitate to take the time to review all aspects of your financing with your chosen professionals.
6. Don’t change your financial profile before funding
One of the most important items contained in the fine print is if you change your financial profile significantly, your mortgage approval could be withdrawn. So on that note, try not to make any changes to your credit or employment before your mortgage is funded. At the very least contact the mortgage professional you have been working with prioe to making the change to see where you stand with your approval.
7. Know your closing costs
Often, the closing costs associated with the mortgage don’t end once your mortgage has funded. In addition to the property tax adjustment and other lawyer related costs, an interest adjustment payment may be due depending on which lender you are with. This means you may have to make a small payment before your first actual full mortgage payment comes out. Simply put, interest with some lenders is calculated from the 1st of the month, so if you don’t close on exactly the 1st of the month, you may have to pay interest for the days leading up to the 1st and the amount is dependent on what day your mortgage has been funded on. Ask your mortgage professional for an estimate of your closing costs which would include any interest adjustments if applicable.
8. Be prepared for your 1st mortgage payment
Your closing date, and payment frequency selection will determine your first payment date. Payment frequencies can include; monthly, bi-weekly, semi-monthly, and weekly. There are also accelerated versions of a few of those which are perfect if you want to reduce your mortgage principal faster. When signing documents at the lawyers, review all the document details to ensure the lender has the right payment account and that you’re aware of the first payment date and amount.
9. Double check one last time
When it comes to mortgage financing, make sure you have confirmed all the important details. These include correct term, amortization, interest rate, proper name spelling, the correct mortgage payment account, and accurate payment frequency; I could go on. If there are changes that need to be made, ensure you receive the corrected documents. It’s best to have the most up-to-date and correct documents on file to ensure everything was set up correctly.
Talk to your friends, read the reviews and do some preliminary interviews to find the professionals you feel most comfortable with. The best way to avoid stress during the mortgage financing process is to work with an experienced mortgage professional who takes the time to ensure you’re comfortable with the commitment you’re making and answers all of your questions in an easy to understand manner.