Florida Home Loan Application Requirements
A critical step in the Florida Home loan application process is to verify the source of your down payment and loan closing costs, as well as your employment, income, assets and debts. The underwriter uses this step to determine your qualifications as a borrower and your overall buying power.
Depending on your personal situation and the type of loan program you are applying for, the underwriter may want documentation on all of the following items:
Down Payment and Closing Costs
The underwriter will document where you will obtain your funds for closing. Acceptable sources of funds for down payment and closing costs include:
- Cash in Bank Accounts.
- Mutual Funds, Stocks, IRA, 401K.
- Real Estate Sale Proceeds.
- A Gift from an Immediate Relative.
- Loans from Your Own Funds (401K).
- Down Payment Assistance Programs.
- Seller Financing or Assistance.
Documentation about your personal assets that add to your net worth and help to prove your credit worthiness. Common assets considered in the mortgage loan application process may include:
- Savings Accounts, Stocks, Bonds, Mutual Funds.
- Retirement Accounts - IRA, 401K.
- Personal Property - Cars, Boats, Jewelry, etc.
- Other Real Estate Holdings.
Review a list of all your current debts. This, along with your credit report, will provide a snapshot of your obligations. It will also confirm that you will not be overextended when the mortgage payment is added to your current debt load.
Your debt-to-income ratio is your gross monthly income divided by the amount you spend on debt. Debt items include mortgage payments (including principal, interest, insurance, taxes, and association fees), car payments, credit card payments, student loans, child support payments, etc. Your lender considers the debt-to-income ratio when approving you for a mortgage loan.
Income and Employment
Documentation to confirm your current gross income and provide evidence of stable employment. Documentation requirements vary depending upon a number of factors - including the source of income. For most employees a change of jobs to one of equal or higher pay will not trigger a red flag. Here is how lenders view the type of employee status you enjoy and if a change in employment will affect your ability to qualify.
If your underwriter qualified you on income that is strictly salary then so long as your new employment is equal or greater than the current job you would only need a letter of employment from the new employer. Typically, a lender will also permit the closing to take place with an after closing condition for your first payroll stub.
If your income is based solely on a 40-hour work week without overtime, than changing to a job with equal or greater hourly pay should not be a problem. However, if your income is dependent upon overtime pay, then do not change jobs prior to closing. Lenders count overtime pay "only" if you have been receiving it for the previous two years and that its continuance is likely.
If your income is from commission, or if 25% or more of your income is from commission, then you should not change jobs prior to closing. Typically, your lender averages your commissions over the last two year period to determine average income. Changing employers eliminates the two-year commission history and places uncertainty on your income status.
Bonus income is only counted when you have been receiving it for the previous two years and its continuance is likely. If a substantial amount of your income is based on bonus then changing jobs without a guarantee in writing of bonus from the new employer could affect your ability to remain qualified.
Did You Know?
In addition, your actions after receiving approval for your mortgage loan can also disqualify you for the loan. A mortgage loan is conditionally approved, with the mortgage lender reserving the right to re-verify credit, income, assets and employment at anytime. Your lender may cancel the loan if there are any adverse changes to your qualification status, such as a major purchase or loss of employment. All borrowers are requested not to use additional credit to purchase items for the new home until after the closing actually takes place. And, please remember that any credit extended, including "same as cash" terms apply to this restriction even if no payment is due.
The Last Minute Credit Check
Your mortgage lender may run a second credit report just prior to closing. Red flags that appear in this credit report can disqualify you for the mortgage loan.
Keep Your Money Where It Is Until After Closing
The balances of your liquid assets were considered when approving your mortgage loan. These assets may include checking and savings accounts, certificates of deposit, money market accounts, retirement accounts, stock and mutual funds. Avoid changes to the balances of these accounts. Do not close accounts. Do not change banks. A large withdrawal or deposit to any of these accounts will trigger a red flag for your lender. If a red flag is triggered, you may be asked to produce a paper trail tracking large withdrawals and/or deposits and you could delay your closing and loose your interest rate lock.
So, before you do anything while you're in the mortgage loan approval process, contact your lender first. It's the only way to be sure to avoid headaches and the possibility of losing your transaction.
Page Authored by Benjamin Dona of Gulf Coast Associates, Realtors
If you have additional questions or would like to get started on your search for real estate on Southwest Florida's Gulf Coast and have questions about mortgage financing, please don’t hesitate to contact us.