How to Avoid Sabotaging Your Mortgage Application

With mortgage rates are hovering near all-time lows, lots of Americans are taking advantage of refinance and home buying opportunities.

The downside of today's unexpectedly-low rates, though, is that mortgage lenders are ill-equipped for the rush of new business.

As a result, the process of underwriting and approving new mortgage applications is taking some conforming lenders as long as 2 months to complete.

This is double the time needed as recently as six months ago.

Because there may be 60 days between the application date and the closing date, it's important for applicants to remember that mortgage approvals can be revoked at any time prior to funding.

As mortgage applicants, there are many events that are out of our control -- job security and health matters, for example. But there are also events that are within our control.

Knowing that mortgage approvals can be fragile, here are 8 things you should absolutely not do while your home loan is in process. It may be the difference between being approved by the bank, and being turned down.

1. Don't buy a new car or trade-up to a bigger lease.
2. Don't quit your job to change industries
3. Don't switch from a salaried job to a heavily-commissioned job
4. Don't transfer large sums of money between bank accounts
5. Don't forget to pay your bills -- even the ones in dispute
6. Don't open new credit cards -- even if you're getting 20% off
7. Don't accept a cash gift without filing the proper "gift" paperwork
8. Don't make random, undocumented deposits into your bank account

Now, avoiding these items may not be practical for everyone. For example, if your car lease is expiring and you need a larger vehicle, it doesn't mean you can't buy the car -- just check with your loan officer first to be sure the new payments won't "break" your approval.

The same goes for accepting cash gifts from parents. There's a right way and a wrong way to accept gifts and doing it the wrong way may prevent you from using the gift as a source of downpayment.

Mortgage lending is full of "gotchas" and with underwriting times stretching to 60 days, it's a lot more likely that a mortgage applicant will trip into one. Following these 8 rules, though, is a good start.

FHA Cash Out Refinancing Gets Tougher Tomorrow!

If you're in want of a cash out refinance, the most liberal cash-out program in town is about to make qualification more difficult.

Effective tomorrow, April 1, 2009, the FHA is reducing the maximum loan-to-value on cash-out refinances by 10 percent, dropping the loan size limit from 95% of the home's value to 85%.

In its official press release, the FHA says it's making the change to "limit its exposure to undue risk".

It also lists the following cash-out requirements:

• With less than 12 months since the purchase date, a home's value cannot exceed its original purchase price -- even if home improvements were made.


• A homeowner must be current on his mortgage payments to qualify


• A second, verifying appraisal may be necessary, depending on loan traits


• Co-signers may not be added to the mortgage note in order to qualify

The last day to register a FHA 95% cash out refinance is Tuesday, March 31, 2009. The loan does not need to be "locked" -- only registered.

So, if you know that a 95% cash out FHA refinance is in your future, talk to your loan officer today about registration.