State Savings Bank

Prepare

Preparing for your Purchase

While you’re saving for your down payment, here are some things you can do to be ready when the time comes to apply for your mortgage.

  1. CLEAN UP CREDIT ISSUES. Negative information typically stays on your credit report for about seven years, although a bankruptcy or an unpaid tax lien can stay on the report for ten years or longer. When you review your credit report, if you spot any negative information, review it carefully for inaccuracies. Depending on the nature of the item, review the account number and balance, the account opening and/or closing date, the payment status, credit limit and any other information you can discover from the report. If any of the information is inaccurate, you can dispute it. Click here to obtain a copy of your credit report.

 

The Fair Credit Reporting Act (FCRA) requires the credit reporting company and the person or company providing information to the credit reporting company to provide accurate information and requires credit reporting companies to investigate complaints in a timely manner, usually within 30 days. The Federal Trade Commission website includes good information, including a sample letter you can use to dispute an error. Click here to see this helpful information.

 

  1. WORK ON YOUR FICO SCORE. Your FICO score is closely related to your credit score and typically changes in small increments rather than by large jumps. But you can do small things to improve it. If you’re not satisfied with your FICO score, learn what goes into a score calculation. Click here to see tips of things you should or should not do.  You can also talk to a lender for additional ideas.

 

  1. VERIFY WHAT YOU READ AND HEAR WITH A MORTGAGE PROFESSIONAL. It’s natural to listen to your family and friends and to read articles and blogs on mortgage and home ownership topics. We see nothing wrong with this and encourage any efforts to educate yourself. However, things may have changed since your parents obtained their mortgage and you can’t be certain your favorite blog writer is up to date with current regulations or trends in your area.  Verify what you hear and read with a lender!

 

  1. ADDITIONAL THINGS TO CONSIDER WHEN YOU'RE CLOSE TO APPLYING FOR A MORTGAGE. As the time draws near to apply for your mortgage, there are things that can lessen or improve the chance for a smooth underwriting and loan approval process. Careful consideration of these items can minimize delays or disappointments. If circumstances are such that you can't avoid something on this list, such as purchasing a new car to have reliable transportation or accepting a better paying job, do not be distressed. Such things do not automatically disqualify you from obtaining financing, they just may require additional documentation or time to arrive at a loan decision.

 

  • Double-check your prequalification to verify it reflects your current financial circumstances and if necessary, get it updated. Knowing the amount of loan you can qualify for can help you narrow your home search to the appropriate price range.

 

  • Avoid opening new accounts or financing a major purchase such as a new car. Taking on new debt could negatively impact your ability to get loan approval or reduce the loan amount you qualify for.

 

  • Be careful about switching jobs. You need to be able to show you have a stable source of income and a new job may make income verification difficult.

 

  • Avoid making large deposits or transferring large amounts in and out of your banking, investment or retirement accounts. Asset verification can be difficult if your accounts show large deposits and you may have to provide additional documentation.

 

  • Do not co-sign on a loan. A co-signer makes you responsible for the loan which can adversely impact your ability to obtain a mortgage.

 

  • Do not run your credit cards up to their limits. Doing so will more than likely lower your credit score and create a higher monthly payment and could reduce your chances for loan approval.

 

  • Do not miss payments. Missing a payment will negatively impact your credit score and possibly your ability to get loan approval. Setting up automatic payments for at least your minimum monthly payment amount can help avoid missing payments.

 

  • Organize your financial paperwork and obtain replacement copies of items you can not find. The faster you can provide requested documentation to your lender, the quicker the process can proceed. Once you apply, you will be asked to provide the following items:

 

  • 30 days of paystubs and the most recent year's W-2 for salaried employees. Paystubs must include the employers name and address as well as YTD earnings and they must show all deductions.

 

  • Previous 2 years of personal and business tax returns for commissioned and self-employed borrowers. We will also need to see all schedules including the K-1s.

 

  • 60 days of full asset statements (Bank, Investment, Retirement) that will be used for the down payment and closing costs. We need to see all pages; summary pages are not adequate.

 

  • If you are using gifted funds, please let your lender know as soon as possible as additional items will be required such as a gift letter and proof of transfer.

 

  • Full Executed copy of the purchase agreement and any addendums that go along with it.
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