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The Loan Process
The Credit Check
Applying for Credit
What to Bring to Loan Application
Mortgages That Favor Buyers

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The Loan Process

Up until now you have been referred to as the "Purchaser". Your name changes here to "Borrower" because that is what the lender calls you.

Finding the perfect house is sometimes difficult. Applying for the loan to finance that house can be an uncomfortable process because the loan approval process is an audit of your personal and business financial affairs. Many times this is a very straightforward process; sometimes it is not. The lender may seem to want to know everything about you, including your blood type. The thing to keep in mind is that you are asking the lender to put out a great deal of their money so that you can purchase your home. Thus, the lender needs to minimize its chances of making a mistake.

The loan officer, or the processor, may ask you for various pieces of information on a number of occasions through the loan approval process. Sometimes, one piece of information that you give to your lender will lead to additional questions requiring more documentation from you. This can be very annoying, but lenders operate under very strict guidelines that are frequently more annoying to the loan officer and processor than they are to you, believe it or not. In return for following these strict rules and regulations imposed by "Fannie Mae" and "Freddie Mac", the interest rates the lenders can offer you are lower than if they did not comply with them.

When you realize that the loan officer, like the real estate agents, is paid on a commission basis and therefore does not get paid until your loan settles, it is easier to understand that they are not doing things just to bother you but are honestly trying to do the best job to get your loan approved. It is better to have too much information when a loan is submitted to the decision makers (called underwriters) than not to have enough and to have to re-submit the loan to them. Re-submitting greatly slows down the process and may cause your proposed settlement date to be missed.

To speed up your loan approval there are several things that you can do to help your loan officer. First of all, be honest at loan application. If there is something that you think may present a problem in your ability to obtain a loan, let the loan officer know right away so that you can deal with it quickly and efficiently. When the loan officer asks for information, get it to them immediately. If there is a problem obtaining information, let your lender know what is happening; they may be able to help, or at least work around the delay.

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The Credit Check

What You Don't Know Can Hurt Your Credit

When was the last time you saw a copy of your personal credit report? If it hasn't been recently, then it may be time to get a copy, especially if you are considering a real estate purchase in the near future.

It is estimated that more than two out of five people have erroneous information on their consumer credit reports. Incorrect information can cause long delays in the approval process and can even be the basis for denial of credit, including a mortgage.

The time to check with credit reporting agencies is when you don't need the credit. It can take months to straighten out a problem and you don't need that added stress during the home- buying process.

The major credit reporting companies are TRW, Equifax and Trans Union. Since they operate independently, you might check your report at all three. If you have difficulty, you can ask for help from your mortgage or commercial banker.

One of the most common misunderstandings homeowners have is that since there may not be a late fee due on the house payment until the 15th of the month, they think it isn't due until then. The house payment is due on the first of every month and will not only be considered late but reported as such if it is received after the first.

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Applying for Credit

Items Needed For A Credit Application

Employment Addresses for two full years
Gross monthly income
W-2's, if available
Proof of pensions, retirement, disability or Social Security
Proof of income from rentals, investments, etc.
Proof of child support or alimony paid/received
Year-to-date pay stub
If self-employed

• Two years' 1040 Tax Returns
• Current year profit and loss statements

Creditors
Each creditor's name, address and type of account
Account numbers
Monthly payments approximate balances
Amount of child care expenses

Banking
Names and addresses of savings institutions
Account numbers for all accounts
Type of accounts and present balances

Miscellaneous
List of assets in stocks, bonds, land
Life insurance cash value (documented if used a cash down payment)
If applicant is selling a home, a copy of sales contracts
Social Security numbers for all parties
Veterans - Certificate of Eligibility and DD-214
Cash or check to pay for application fee

Realtors
Copy of sales agreement
Copy of listing on property
Instructions on how appraiser is to gain entrance

What to Bring to Loan Application

1. A signed copy of the contract of sale, along with all addenda.
2. Your W2's for the last three years.
3. Most recent pay stubs.
4. List of bank account numbers and bank addresses, with approximate balances of each.
5. List of creditors: car loans, student loans, credit card accounts, child support, alimony, with addresses, account numbers and approximate balances.
6. Canceled checks for the past 1 2 months for each of your mortgages.
7. Social Security number for each borrower.
8. A check to pay for appraisal and credit reports.
9. A copy of sales contract for present home, if applicable.
10. A copy of diploma or transcript if you were a full-time student at any time during the last three years.
11. If you are applying for an FHA loan you will need: 1) your social security card, 2) a picture identification, and 3) copies of your last two bank statements or passbook.
12. If you are a VA buyer you will need: 1) your Certificate of Eligibility, 2) the name and address of your nearest living relative, and 3) if you are on active duty, bring completed DD 1 747 from your base Housing Officer.
13. If self employed, bring: 1) year-to-date profit and loss statement and balance sheet signed by an accountant, 2) signed business and personal tax returns for the last two years.
14. If you own any rental properties you will need: 1) current leases with terms of 1 year or more, and 2) the names and addresses of all mortgage companies and your account numbers.
15. If applicable, documents relating to any judgments against you (bring copies of release); bankruptcy - provide copies of petition for bankruptcy, schedule (list of creditors) and discharge of bankruptcy and any other delinquent credit records.

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Mortgages That Favor Buyers

With so many mortgage features, it's difficult to know which ones offer the most to borrowers. Here's a breakdown of typical mortgage features and which ones favor the borrower or the lender.

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Buyers Remorse >First Time Loans Most first-time buyers can qualify for a mortgage loan, but they may need help from parents to make the down payment or closing costs on their home. There are loan programs that minimize the down payment and closing costs for first-time buyers. These programs usually require that 3 to 5 percent of the purchase price come from the buyers' funds, not from a loan or gift. Most lenders ask for the last three months' bank records. The borrower will be asked to reveal the origin of any large deposits. If the money comes from the homebuyer's parents, the lender may not consider those funds when qualifying the buyers. Parents who are planning to help their children finance a home should transfer any funds several months before the house-hunting process begins. If it is a loan rather than a gift, a formal re-payment agreement should be drawn up between parents and children to eliminate potential misunderstandings or future complications with either estate. See All Tips In The "Buyers Remorse" Category > See Complete Library Of Hundreds Of Tips In 30+ Categories >

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