The Mortgage Process — An Overview….
How do lenders evaluate you?
Your credit history is very important in applying for a mortgage. If you would like to learn more about your credit and/or learn how to improve your credit you can download the 34 page booklet called Knowing and Understanding your Credit at the following link www.ExodusNetwork.com/buyer101/credit.pdf.
What criteria do lenders use to evaluate whether they will lend you money?
There are a number of different underwriting analysis tools that lenders can use to help them evaluate whether they will lend you money. One of the resources that some lenders use is called Desktop Underwriters. We have included one more ebook which was published by Desktop Underwriters which explains what lenders collect and analyze in order to make a decision about your loan application. The more you understand about this important financial decision, the more control you will have over the process. Download the overview from Desktop Underwriters at www.ExodusNetwork.com/buyer101/Underwriters.pdf.
Checklist for Applying for a Mortgage
Here is a general checklist which includes most of the information that you and any co-borrower will need to supply to a lender. Some lenders have slightly different requirements, so you may want to contact your lender before the interview to ensure you bring the correct types of information.
Your lender will let you know what items s/he needs to take initial steps for pre-approval. This information is likely to be requested of you and the co-applicant on the loan application form.
___ Social Security Number/Date of Birth
___ Paycheck – Most recent pay stub that shows year-to-date earnings.
___ W-2 Tax Forms – Original copies sent to you by the Internal Revenue Service for the past two years.
___ Employer Information. – Names, addresses, and telephone numbers of employers for the past two years
___ Account Information – Account numbers and current balances of checking, savings, and any other accounts.
___ Current Assets – Individual Retirement Accounts (IRAs), CDs, stocks, bonds, etc.
___ Personal Property – Value of property that can include life insurance, retirement accounts, cars, etc.
___ Liabilities – Auto loans, student loans, credit cards, and other installment debt — provide name and address of each creditor and the monthly payment and total amount due.
___ Current and Previous Addresses – If you own a home: Bring the property address, current market value, mortgage lender name, account number, current monthly mortgage payment, and outstanding mortgage balance. – If you’re renting: Bring the property address, name and address of the landlord, current monthly rent, and previous address/landlords if you’ve lived in your current address for less than two years.
___ Agreement to Purchase – A signed copy and any amendments, a copy of the listing form for the property, the legal description of the property, and receipts for or down payment deposits.
There may be some special situations that require you to supply additional information. These include:
- If you are self-employed or work on a commissioned basis, you should bring your federal tax forms for the past two years and a current year-to-date profit and loss statement.
- If you are separated or divorced, you should bring a copy of your divorce decree and separation agreement. Also bring documentation on alimony or child support payments you are required to make or you receive as income. Proof of this income can be the clerk of court’s history of payments or canceled checks for the past year.
- If you include pension, disability, Social Security, or other public assistance as part of your income, you’ll need to bring a copy of an award certificate or a check from the issuing agency.
- If you have a bankruptcy, foreclosure, or any judgments against you over the past seven years, you’ll need to bring relevant information about the proceedings. Such information includes a copy of the bankruptcy discharge and schedule of both debts and assets. An attorney’s letter that discusses the outcome of the proceedings should be included if there are judgments against you.
This information adapted from http://www.mortgagecontent.net/content/fanniemae/loan_interview_materials_checklist_fm.html
Before you begin looking for a home it is definitely to your advantage and will strengthen your negotiating position to be pre-qualified for a mortgage. Call the Veenstra Team at 269-350-5514 to get the names of recommended lenders who will be able to effectively serve you.
Types of Mortgages
There are many types of mortgages. Read the booklet “Choosing the Mortgage that is Right for You” before you talk to a lender. Having a good background before you decide to talk to the lender will ensure that you can ask the questions that are important for your personal situation. You will find this booklet at www.ExodusNetwork.com/buyer101/rightmortgage.pdf.
Once you know what you can afford, and you have a good handle on your credit information, it may be time to speak with a lender. Make contact with a Mortgage Lender so that you can be pre-qualified or pre-approved for a mortgage. There are a couple of significant differences between being pre-approved and pre-qualified so be sure you ask the Lender to completely explain the difference to you and help you decide what is the best step for you to take.
Typically you contact the lender and provide verbal information about your assets, expenses and income. The lender may choose to check your credit report or not. Once a there is a completed and signed offer to purchase a home, you must complete a loan application. There’s usually no fee, BUT neither is there any GUARANTEE that you will be given a mortgage.
Typically with a pre-approval you provide actual documentation of income, debts and assets and you complete a loan application. The information that you provide is verified and is actually approved by the lender. Once you find and complete a purchase agreement you do not need to complete any additional loan applications. In this case your mortgage would be approved contingent on the appraisal of the home that you decide to purchase.
Many people determine their own estimate of the amount of financing that you may be eligible for, but it is important to actually talk to a lender who can officially pre-qualify you. Once you have the lender’s pre-qualification then you can start talking to The Veenstra Team about the marketplace and what is available in the market for the price that you can afford. We recommend that all potential home buyers get pre-qualified. A pre-qualification or pre-approval letter gives The Veenstra Team a much stronger negotiating starting point with the home seller.
If after going through the pre-qualification process, you find that you do not have enough money saved for a down payment or if you have too much debt right now, the lender will usually be able to help you to determine the steps that you can take to improve your credit or increase your down payment over the next few months so that you will be in a great position to purchase.
The Veenstra Team is happy to answer additional questions about financing and very happy to connect you with a lender with a great track record of service so that you are able to get pre-qualified or pre-approved for a loan. You would also be able to get an overview of all the various types of loans which may be available for you. These are important details to ensure that you are ready to write a solid offer when you find the right home.
There are a few things about borrowing money that can also hurt you if you are not aware of their importance. We have another booklet ready for you to download which is called “Borrowing Basics, What you don’t know CAN hurt you”. Download that booklet at www.ExodusNetwork.com/buyer101/borrow.pdf.
We have included a list of 10 Questions that you will want to ask your lender. You can download the questions by going to www.ExodusNetwork.com/buyer101/10Questions.pdf so you can have it in front of you when you talk to the lender.
How much can you really afford? A FREE Mortgage Calculator for you!
We are providing a free mortgage calculator that you can install on your own computer so that you will be able to input numbers from actual homes that you may be interested in. This calculator will be an easy way to compare the financial side of each of the homes that interest you.
You will need to have either Microsoft Excel (which comes in all versions of Microsoft Office) or the free word processing and calculator program Open Office to use the calculator. Download the document www.ExodusNetwork.com/buyer101/OpenOffice.pdf. You will see that this program also has a word processor that will open all Microsoft Word documents as well as a couple other programs. It is totally free to download and use this software.
If you do not have Excel but did download the Microsoft Excel Reader which is available from Microsoft you will still need to install Open Office. Microsoft Excel Reader will NOT allow you to use all the calculator functions.
You will find the Mortgage Calculator at www.ExodusNetwork.com/buyer101/MortgageCalc-en.xls. Save the attachment to your hard drive and then you can open it up. (Sorry, we cannot provide technical support for your computer and downloading problems.)
HOME SEARCH TOOLS AND TIPS FOR BEGINNING THE SEARCH FOR THE RIGHT HOME!