How to speed up your loan approval

Very few people decide on the spur of the moment to buy a home or refinance their existing home. Usually, the decision-making process takes weeks, even months but there are things you should think about before crunch time for making a go/no-go decision. There is a fairly extensive list of documents you should start filing in an easy-to-reach location for future reference. And there are some other considerations as well.

Documents you will need

If you are self-employed:

Business-related documentation must be signed off by your CPA who has to attest to their accuracy.

Past credit history

If you have been involved in a short sale, bankruptcy or foreclosure, locate and scan copies of any documentation showing date the property was sold or transferred to a bank or date of discharge of the bankruptcy. You’ll need them at the ready to send to your lender.

Take an early look at your credit report. If there are items on your credit report that should have been removed or should be disputed, get started as soon as possible on taking care of these issues. You may need professional help with some of them, or you may be able to do it yourself. All three major credit bureaus have information on their websites for dispute resolution. If you are weeks, rather than months, away from getting a mortgage you may want to consult a mortgage loan officer before paying off collection items that are showing on your credit report. In some cases, you may have to drop your dispute with certain creditors so your lender can get an accurate picture of your credit score. You may need to negotiate a payment plan with your creditors as part of the mortgage qualification process.

Down payments & closing costs

In order to satisfy the Department of Homeland Security that you are not a money launderer, you will have to prove source of funds. It’s always a good idea to keep mortgage-related monies in a distinct account, where your lender can easily trace deposits going in and dates these were done. It’s a much harder task for them if your usual checking account has money flowing in and out for myriad purposes associated with your regular daily expenses.

A little preparation can help immensely when you are thinking of refinancing or buying a home. For some people it seems like a lot of nit-picking and too much trouble. But think of it this way: Say you earn $35 an hour and it takes you a total of ten hours digging up information your lender needs, signing documents and going to a closing. That’s $350 of effort. The benefits of getting the right mortgage, at a rate you deserve and that makes sense for your purpose, could be worth tens of thousands of dollars over the life of the loan. That’s a reasonable expenditure for a pretty decent return.

photo courtesy of 401(K) 2012, Creative Common License 2.0, modified from the original 640x480 to 640x360.