Congratulations, you've either prequalifed through our website or submitted a loan application and been told you're approved. But what does that really mean?

It really means that based on the information you've supplied, you appear to meet the requirements for one or more of our loan programs. In effect you are really conditionally approved. To obtain a loan commitment and complete the purchase of your dream home, the information you've supplied must be documented and verified. If you can't supply the required documentation, made an error on your application, your situation changes before your loan closes, etc., you may find that you are no longer "approved" for a loan. This is true not only at Dream Home Funding, but at all of our competitors as well.

Over the years we have seen loans declined after receiving conditional approvals for any number of reasons. Some of those reasons were out of the borrower's control (like an investor changing the underwriting guidelines after a conditional approval has been issued but before all conditions have been satisfied, or the property being found to be unfinanceable), but in the vast majority of cases the borrower had no one else to blame for their loan being declined but themselves. In an effort to prevent that from happening to you, I am supplying this list of pointers that will help you avoid the pitfalls that have tripped up others.

The primary areas where borrowers cause themselves problems are with their credit, assets, and/or income. I have tried to outline the most common problems I've seen below, but inevitably someone will figure out a new and more creative way to screw their deal up. The best way to avoid problems is to call and ask us before you do anything that will effect your credit, assets, and/or income.

Credit Issues
During the application process we pull your credit report, and issue your conditional approval based on what is there. You should be home free, right? Wrong, most people don't realize it, but before closing another credit report l be pulled. Also, if you spend months shopping for a home, another report will be pulled before we even submit your loan to underwriting. If you do any of the following after the first credit report is obtained and before we close your loan:

apply for or actually obtain more credit or credit cards;
purchase a new car, home or other major item on an installment loan;
run up the balances on your existing credit cards;
stop paying your bills or pay them late; and/or
pay off all or some of your credit accounts,

at best you're going to need to come up with additional documentation, possibly your downpayment and interest rate will be increased and/or your closing delayed, and worst case your loan will be declined altogether. Better to be safe than sorry, if you have a credit related question or are thinking about doing something that will impact your credit, please call your loan officer and discuss it first.

Downpayment and Closing Cost Issues
When you received your conditional approval you were told approximately how much money you would need to bring with you to closing. We weren't joking about that number, and may have even been slightly low since it is only an estimate and sometimes there are unexpected expenses. Neither your loan officer or the underwriter is going to be amused if you use your downpayment and/or closing cost money before closing to:

buy furniture and appliances for the home you will no longer be buying;
pay off some of your credit cards;
take the family on vacation to Disney World;
go elk hunting in Colorado;
go gambling in Las Vegas;
buy equipment for your business; etc.

The examples I listed above are real examples of borrowers with seriously screwed up priorities who in most cases did not wind up buying a new home. Please try to avoid using any of your money for nonessential purposes (but continue paying all of your normal bills) while your loan is being processed.

Not only will you need to have the money before closing, but for some loan programs (usually the ones offering the lowest interest rate) you may need to have had the money in your bank account for the last 2 months and/or document the source of new funds. Any large deposits in the last couple of months will have to be explained, and the source of those funds documented if you want to use them. If you are planning on selling something; getting an inheritance, gift or income tax refund; etc., that is probably fine, but needs to be properly documented. Do not just take the money and deposit it, then call your loan officer and say the money is in the account. Let your loan officer know up front how and when you will be getting the funds for closing so the source of those funds can be properly documented.

Income Issues
This is another area where most borrowers think they are home free after approval. However, one of the last things that happens before closing is that a phone call is made to your employer to verify that you are still employed. If you told your boss to "take this job and shove it..." last week or they told you to get lost, then you have a big problem. If you're lucky you already have another job that pays more in the same line of work, or we didn't need your income to qualify you for the loan in the first place since your spouse has a great paying job. If you don't have a new job or you have decided to make a career change and/or become self-employed, then your loan will probably be declined and you will be ineligible for a mortgage until you get another job in your old line of work or have 2 years of self-employment history and/or experience in your new line of work.

Keep in mind too that certain types of income, and income that isn't properly documented cannot be used for qualification. Consult with your loan officer about the requirements for any unusual income sources (anything that isn't salary reported on a W-2) you may have.

Self-employed borrowers often run into problems because the income they report on their loan applications is frequently much higher than the income reported on their tax returns. Unless you are applying for a No Doc, Stated Income, or No Income loan program we will have to go off the income you report on your tax returns after making a few adjustments. Don't be surprised if we approve your loan after you tell us you make $250,000 per year on your loan application, but then change our mind after seeing on your tax returns that your business has lost $5,000 the last couple of years in a row.

Don't Disregard Your Lenders Requirements
You may have been pre-approved for the loan but your work with the lender is far from over. In order to process your loan, you need to meet certain requirements. Your lender will need copies of your bank statements, W2s and other paperwork. It is up to you to get it to him or her as soon as possible. Failure to submit certain qualifying documents could cause you to lose your loan and the financing you need to buy your home.

Issues The Borrower Has No Control Over But Needs To Be Aware Of
These are a few of the things that are out of your or the loan officer's control that can go wrong. In most cases the result is a short delay while your loan is submitted to a different investor or you find a different home to purchase.

It doesn't happen often, but on occasion our investors will decide they are experiencing too many foreclosures on a program, and either discontinue it or tighten the underwriting guidelines for it. Depending on what stage of the loan process your loan is at, this may result in your loan being declined, or a program change being made.
Occasionally our investors are purchased by other companies or go out of business, and when that occurs loan programs may become temporarily or permanently unavailable causing your loan to be delayed or denied.
If the home you are buying does not appraise for at least the purchase price, the sale will have to be renegotiated, you will have to pay the additional amount out of pocket, or you will have to find a different home to purchase. If you are refinancing your loan amount may have to be reduced.
If the appraisal indicates a problem with the condition of the house you are buying repairs will have to be made or a different house will have to be selected.
If a pest inspection determines the house has an infestation and/or damage from infestation, treatment and repairs may be required.
If clear title cannot be obtained for the home you wish to purchase, a different home will have to be selected.

If the survey indicates a problem that prevents title insurance from being issued on the property, a different home will have to be selected.

By communicating with your loan officer most of the problems described above can be avoided. Also, remember that unlike fine wine, loan files don't get better with age. The quicker you locate a home to purchase and provide the required documentation, the better your chances of having a problem free loan transaction. Hope you have found this helpful, and will call with any questions.