Selective Homes Blog

If you’ve tried to get a mortgage or refinance in the past couple years, you know it’s like putting your present body and financial past through an X-ray machine. More lenders are scrutinizing applications since the financial crisis fallout, which has triggered fears of borrowers who will default, walk away from their mortgage or try to pull a financial fast one.

Here are some triggers that might cause the most lender scrutiny of loan applications, according to recent reports:

Large deposits of money: Lenders are required to account for any cash gifts for down payments, such as from relatives. So if a borrower earns $5,000 a month and suddenly deposits an extra $15,000 beyond that, lenders could question where the money came from when applying for a loan.

The home’s new address: Buyers who are purchasing a primary home three hours from where they work also might draw increased scrutiny. Borrowers might even need a letter from their employer stating that they work from home a few times a week. That’s because lenders might want to ensure the borrower plans to be an owner-occupant and not buying the property to rent or flip, which must be disclosed.

Signing up for new credit cards: Borrowers should avoid taking on extra debt when applying for a loan — so they may want to wait to buy the new furniture. Extra debt can be a red flag to a lender and could even jeopardize closing on a new home if the debt pushes the borrower’s total debt levels beyond lender-accepted limits.