The pre-approval process is a necessary part of buying a home, and while it is quite simple, it can be tedious particularly if you’re not organized. This is a quick guide on how to simplify your life when you get a loan! I give to my clients and I use them myself for my personal financing.
Use Cloud Storage
Rather than sending your lender eleven PDF’s and worrying about file sizes, I find it is much easier to send links to a cloud folder. This way you have everything ready to go in one easy to find spot. I use Google Drive, but you can use Dropbox, Box, iCloud, or any cloud software you prefer. Some cloud sharing tools even allow you to set expiration dates on the links.
When you set up your cloud sharing, open a new folder and put a few things in it. If you don’t have a digital copy or a scanner, you can use the CamScanner app on your phone to quickly scan your returns into the cloud storage software you’re using.
- Tax returns – 2 years
- Bank statements – 2 months
- Photo copy of Drivers license (both sides)
- Loan Application – your lender will send you a loan app if it’s not already on their website/software. Fill it out then scan it into the folder.
These items are not difficult, but the longer you put them off, the more encumbering they become and the further you get from being ready to make an offer when the perfect house comes up. Getting these items done quickly puts you in a strong position to buy and keeps your inbox from filling up with emails checking in on your progress!
I recently ran into a hurdle with my personal loans that could have been avoided with proper planning. If you have more than one bank account or use different banks for different things, you might need to make a decision which account to use for your mortgage. I chose to use a general investment account because it had a longer history of sufficient funds to make the purchase than my regular checking account which would fluctuate more. My investment account has a very slow processing time for transfers – 3 to 4 business days. During escrow, I needed to make a few transfers in between that took longer than I would have liked because there were deadlines I needed to meet during escrow. Had I used a regular checking account, or even two accounts within the same bank for seamless transfers, those issues wouldn’t have come up. If you have multiple accounts, I would opt for the one that is most versatile and fluid in making transfers and quick payments.
Your lender will run your credit report. You can get great interest rates with scores in the 700’s, but I found that when my score reached 760, I was able to get a much better rate than the lower 700 range. Some lenders offer a rescore program where they advise you on how to rapidly increase your credit score through various strategies. I used this program and was able to raise my credit score 42 points in about 3 weeks by paying down debt. This allowed me to get a better interest rate effectively saving us over $50,000 over the course of my 30 year mortgage, and I reduced my debt! When you’re considering getting a loan, analyze what debt you currently have and what you might be willing to pay down in order to have the best interest rate possible, and discuss the pro’s and con’s with your lender.