5 Rules to the Game of Mortgage

Knowing lending guidelines is like knowing rules to a game. We often call mortgage lending “playing the game”.  When you play a game, there are rules.  You may not like them, understand their logic, or even know them. The person that knows the rules the best, however, usually wins.  We want your buyers to win all the time.

Getting a mortgage is not usually about what you should do, but rather what to avoid.  If your buyers are thinking of buying in the next 6 months, here are 5 rules of the game to help them qualify.

1.     Don’t switch from an employee to self-employed.  Salaried and hourly employees income is very straightforward.  Changing jobs is not an automatic loan decline. Changing jobs to a self-employed or 1099 borrower has a whole ‘nother set of rules. Self-employed buyers are not documented with paycheck stubs, but by verified tax returns of the past 2 years in most cases.  Without the 2 year history of self-employment, it could derail a borrower’s chances of allowing their income to qualify.  Have them call the Easterbrook Team if your borrowers are considering a job change.

2.     Balance your checkbook. Having the attitude of “my checkbook always balances – I have overdraft”, won’t cut it for some loan types.  Underwriters are required to check for irresponsible financial behavior for some loan types.  Another reason to get the Easterbrook Team involved before you “play the game”.  We can often counsel borrowers about what underwriters are looking for to give them time to clean up their checkbook.

3.     Don’t apply for new credit and/or open accounts during the loan process. Yes, your credit is monitored throughout the loan process. Don’t transfer a $5,000 credit card balance to lower your payments.  Hold off on any large purchases until close of escrow.  It could cost you your largest purchase – your house!

4.     DO sweat the small stuff.  Ignoring even a small bill of $10 can tank your credit score if it is a recent late worse – a collection.  Pay all your bills promptly – it will help you win at the loan game.  On the Easterbrook Team, we have a credit simulator that allows us to navigate past lates and collections.

5.     File your tax returns.  We know – what a hassle, right?  A little known “rule” is that lenders have buyers fill out a form called a 4506T.  This allows us to access tax transcripts for loan approval.  No transcripts?  No loan.  File those returns. 

Yes, there are lots more rules to the mortgage game.  Patty and John get out the playbook and map out a plan to win with every buyer they meet.