Wednesday, April 06, 2005

Avoid Loan Death!

If you are applying for a mortgage, here are a few specific rules to help you make it to closing alive:

NEVER respond to a bank online request for your passwords or identity information. These may be opportunists looking for access to your accounts and it could be a coincidence that you are applying for a loan (who isn't these days?). Legitimate Banks may mail disclosure documents about your loan prior to closing. If you are working with a mortgage broker it is possible that more than one bank is competing for your loan--so keep the documents but do not respond to them...that's your broker's job. This can be confusing as the documents the bank sends may not be up to date anyway...but is does alert you that someone has applied for a loan in your name.

NEVER co-sign a note with anyone for anything! (Unnless yo uare willing to accept their payment history on your credit)

NEVER give out your Social Security Number to a bank or lender who doesn't ask you to sign a Certification and Authorization form FIRST (informing you of your rights). Once this person has pulled your credit, you should be provided with a copy of the report showing your FICO scores.

NEVER shop online for a mortgage if you value your credit score (online lender 'hits' will lower your score because they farm out your application to multiple lenders at once). It's fine to check rates online but you should know that you may not qualify for a specific rate given your particular situation. Every bank has a specific set of guidelines....for example: self employed borrowers pay a higher rate unless their Schedule C tax documents prove a sufficient income after expenses.

NEVER fall for a voicemail or caller claiming to be a 'person from the mortgage company' offering a ridiculously low rate. Sure there are 1.25% rates but these things usually have a vrey complex structures and unless you recognize the caller--chances are they are just fishing.
NEVER be late on your mortgage payment just before your loan closes. Even one day late will hurt with some banks....and Home Equity lines are the worst...I've had a client be reported for a 30 day late for the $1.70 service charge! One 30 day late payment on your record may put you in a higher risk and higher interest rate bracket (banks will work with prior notice, not excuses).

NEVER be late on your credit card or student loan payments.

NEVER rack up your credit card balances (over 30% balance) before you apply for a mortgage.

NEVER move all your credit balances to one card just before you apply for a really want to keep your cards evenly balanced so none are maxed out. After your loan closes, move balances to the cheaper rate card and keep all your cards open (old is good).
NEVER apply for any new credit cards 90 days before you apply for a mortgage.
NEVER close credit card accounts even if you aren't using them (just lock them up). The FICO scoring system and many lenders look at available credit--so having open cards with zero balances actually adds that particular credit limit to your available credit.

NEVER EVER buy a car or major applicance while waiting for your mortgage to close!

NEVER open new credit cards while waiting for your mortgage to close!

NEVER listen to what a realtor, your brother-in-law or your boss has to say about interest rates or specific loans. These very nice helpful people have no business discussing rates or loans because they don't have the right to full disclosure about your financial circumstances.

NEVER EVER lie about your financial situation to your lender or mortgage broker because they will find out and eventually have to turn you down or scramble at the last minute to find a solution that you do qualify for. (You can say anything you like to your realtor, brother-in-law and boss - we won't tell.) 

Wishing you every credit sanity