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Debt help journal for people who want to learn more about debt consolidation, debt settlement, debt management, debt education, credit card debt, credit repair, and how to become debt free.
Wednesday, July 07, 2004
Applying For Your Mortgage
sponsored by http://debt-education.org
===============================================
Want some help going step-by-step through the process of applying for your mortgage loan? Learn what to expect and what your options are.
Keep in mind, there is no substitute for a direct relationship with a reputable mortgage lender. Mortgage can be complicated, and every state has different laws and regulations. Your mortgage lender will know the laws and regulations. So turn to your lender for help if there's something you don't understand.
Buying a home is stressful and the process of applying for and qualifying for your mortgage is one of the most stressful financial transactions you'll ever make. We all worry that we're not going to qualify and that could end our dream of being a home owner.
We think if you know what the mortgage process is all about and what your lender is looking for you'll find applying for your mortgage isn't as bad as you think. Mostly it's just time consuming, but wouldn't you expect that from one of your biggest financial decisions? So, keep it all in perspective.
This material will help you understand the mortgage process.
Section 1: What to expect
When completing an application you don't really have to tell your mortgage lender everything about your whole life. All your lender needs to know about is your employment and finances, and information about the house you're buying. But you do need to provide quite a bit of detail, backed up by documentation about each of these topics.
The best way to make the application process easier and faster is to be prepared for it. Have the necessary information all assembled and ready to use before you start to fill out the application.That will help speed up the process for you.
Next, let's look at the information your lender will most likely need to know. Each lender has different procedures and requirements, so you'll find it useful to review this material with your lender.
The home you're buying serves as the collateral for the loan, your lender is going to want to evaluate the home through an independent appraisal company. When you make your application you will need to provide:
A complete copy of the sales contract (including all addenda signed by all parties), the full names of the sellers and buyers as they will appear on the new deed, the amount of earnest money deposited, and who will be responsible for the closing costs, origination fees and any other fees.
You'll need the mailing address and description of the property. The mailing address must be a complete description meaning the type of property (single family home, town house, condominium, etc.).
Contact information for the appraiser to gain access to the property. You'll need the name, address and telephone number of the real estate agent and/or seller of the property who can let the appraiser inside.
If your doing new construction, you'll need a complete set of plans and architectural specifications specifications.
Your lender is going to need some of your personal information. They will need a detailed and accurate picture of your financial situation. This means, you and your spouse (or other co-borrower(s)) must provide a good deal of personal information to your lender, be prepared to share your whole financial history. Let them ask you for it one piece at a time, but have it with you and ready to present.
Your personal information includes your social security number, age, number of years of schooling, marital status, number and age of dependents, and your current address and telephone number. If you've lived at your current address for less than two years, be ready to provide your addresses for the past seven years.
You'll also be asked for your current housing expenses, including rent or mortgage payments, real estate taxes, homeowners insurance, and the name and address of your landlord(s) or mortgage lender(s) for the past two years.
Your employment history and income sources are going to be very important in qualifying for a mortgage. Lenders need to make sure you can make regular monthly payments to repay your mortgage loan, along with the other costs associated with owning a home. So, they're going to require detailed information about your employment and other sources of income, including:
At least two years of verifyable employment history. This information should include your employer's name, address, telephone number, your job title or position, how long you held the job, and all financial information including salary, bonuses, commissions and average overtime pay. The mortgage lender will mail a form to your employer and previous employers (if you've held your current job for less than two year) to verify the information you provide.
The mortgage lender is going to need pay stubs and W-2 forms. The pay stubs should be from recent paychecks; W-2 forms for the last two years. Many lenders will require copies of your entire federal tax return, depending on your situation.
If you are self-employed, be prepared to provide complete tax returns and financial statements for the last two years, along with a profit-and-loss statement for the current year.
The lender will ask for a written explanation if there are gaps in your employment. If for any reason, like illness, layoffs or other factors, there are gaps in your employment record over the past two years, be prepared to provide your lender with this written explanation.
The lender will also want any records of dividends and interest received from any investments. The form 1099s provided annually for your tax records are ideal for fulfilling this requirement. If this doesn't apply to you, then don't worry about it and just say "none" when asked about investments of this type.
You'll need proof of any other income you rely upon. This can include rental properties, social security or disability payments, child support, and so on. Proof of these sources of income could be canceled checks, copies of leases, certification of benefits, divorce decrees, or other written evidence. You do need something in writing though.
Your lender needs to know the personal assets available to you, so you should be ready to furnish information about bank accounts, investments and significant pieces of property, including:
Show proof of all your bank accounts. These should include checking, savings and money market accounts. For each account, be prepared to provide the name and address of the institution, the name(s) on the account, the account number and the current balance.
You will be asked to sign a form that will be sent to your bank(s) to verify the information you provide. If there are differences, you'll have to account for them, so be sure you provide correct balance information.
Plan on providing statements for at least the last two months.
Be prepared to provide the current values of stocks, bonds, CDs and other investments, including mutual funds as well (available from newspaper stock tables).
Tell the lender your vested interest in retirement funds, including any IRAs, SEP-IRAs, Keogh plans or other personal or company-maintained retirement funds (available in annual or quarterly reports from your retirement fund).
If you have life insurance information, including the face amount and cash value of life insurance policies in force (available in annual or quarterly reports from your insurance company, or from the policy), your lender will want this information too.
Lenders will want automobile information, including the make, model and year of any vehicles you own.
Lenders are looking for all real estate information. The address and market value of any properties you own, along with the rents collected, the mortgage on the property and the monthly mortgage payments. A profit-and-loss statement is required for investment properties.
Be prepared to give the fair market value of significant personal property, including furniture, artwork, jewelry, photographic or computer equipment, and the like.
Your lender will also want to know where you will get the funds for your down payment, closing costs and other fees. Gifts may be used for this purpose, but must be verified in writing (and that includes gifts from relatives). If you're providing less than five percent of the sales price in down payment, the gift must come from a relative, along with a letter stating the person's relation to you, the amount of the gift and that no repayment is expected. It must be signed and dated.
Just as your lender needs to know what assets you have, they will want to know how much your liabilities are, what you owe, and about your credit history. You should be prepared with the following information:
An itemized list of current debts. This list will include all current bills you owe and loans you may have: automobile loans, bank and credit union loans, any existing mortgages or home equity loans, and outstanding balances on credit cards such as Visa/MasterCard/any credit cards in your name. Debts also include any alimony, child support or maintenance payments you're required to make. You should include all unsecured debt here (credit cards, mediacl bills owed, signature loans owed, etc.).
For each separate account or loan on your list, you should include the account or loan number, the monthly payment (if fixed), the number of payments remaining and the outstanding balance.
Credit report. You do not need to provide your lender with a credit report, but your lender will get one independently to verify the information you provide. And any differences between what you tell your lender and what's in your credit report will have to be resolved before your mortgage can be issued. For that reason, some home buyers may want to order a credit report for their own review before they complete their application. That way, if there are any errors or discrepancies you can take steps to correct them.
If you have any reason to believe your credit report may contain incorrect information, you should make every effort to correct it before you make your application. You can order a copy of your credit report by contacting one of the three major credit bureaus: TRW, Equifax, and Trans Union.
If you've have credit problems, do not try to hide them. Tell your lender candidly, and explain what happened. Lenders recognize that there are many legitimate reasons for difficulties with credit, such as unemployment, illness, marital problems or other difficulties. Provide a written explanation of the circumstances to your lender, and your explanation will be considered during the approval process.
Generally, if the problem has been corrected and your payments have been on time for a year or more, your credit will probably be considered satisfactory. However, chronic late payments, loan defaults or judgments against you may damage your credit standing and prevent you from obtaining your mortgage. If you have been through bankruptcy proceedings within the last seven years, you should be prepared to provide complete details along with supporting documents regarding your bankruptcy and the reason behind it.
Once you and your lender have completed your application (or just you, if you're doing it yourself), you will be asked to certify the information with your signature. You must also promise to notify the lender of any important changes in your status.
Finally, you agree that your lender can verify the information you've provided by making contact with all people and agencies you've listed, and agree to allow them to submit your account history to credit reporting agencies.
In addition, you'll be asked for information on your race and gender. This is used by the federal government to monitor compliance with fair housing and equal credit opportunity laws. Even though your lender is required by law to ask for this information, you don't have to provide it. Iit's strictly voluntary on your part and will have no effect on your loan application.
Most lenders ask applicants to pay for the credit report and appraisal at the time the application is completed. These fees are generally less than $500.
http://debt-education.org
sponsored by http://debt-education.org
===============================================
Want some help going step-by-step through the process of applying for your mortgage loan? Learn what to expect and what your options are.
Keep in mind, there is no substitute for a direct relationship with a reputable mortgage lender. Mortgage can be complicated, and every state has different laws and regulations. Your mortgage lender will know the laws and regulations. So turn to your lender for help if there's something you don't understand.
Buying a home is stressful and the process of applying for and qualifying for your mortgage is one of the most stressful financial transactions you'll ever make. We all worry that we're not going to qualify and that could end our dream of being a home owner.
We think if you know what the mortgage process is all about and what your lender is looking for you'll find applying for your mortgage isn't as bad as you think. Mostly it's just time consuming, but wouldn't you expect that from one of your biggest financial decisions? So, keep it all in perspective.
This material will help you understand the mortgage process.
Section 1: What to expect
When completing an application you don't really have to tell your mortgage lender everything about your whole life. All your lender needs to know about is your employment and finances, and information about the house you're buying. But you do need to provide quite a bit of detail, backed up by documentation about each of these topics.
The best way to make the application process easier and faster is to be prepared for it. Have the necessary information all assembled and ready to use before you start to fill out the application.That will help speed up the process for you.
Next, let's look at the information your lender will most likely need to know. Each lender has different procedures and requirements, so you'll find it useful to review this material with your lender.
The home you're buying serves as the collateral for the loan, your lender is going to want to evaluate the home through an independent appraisal company. When you make your application you will need to provide:
A complete copy of the sales contract (including all addenda signed by all parties), the full names of the sellers and buyers as they will appear on the new deed, the amount of earnest money deposited, and who will be responsible for the closing costs, origination fees and any other fees.
You'll need the mailing address and description of the property. The mailing address must be a complete description meaning the type of property (single family home, town house, condominium, etc.).
Contact information for the appraiser to gain access to the property. You'll need the name, address and telephone number of the real estate agent and/or seller of the property who can let the appraiser inside.
If your doing new construction, you'll need a complete set of plans and architectural specifications specifications.
Your lender is going to need some of your personal information. They will need a detailed and accurate picture of your financial situation. This means, you and your spouse (or other co-borrower(s)) must provide a good deal of personal information to your lender, be prepared to share your whole financial history. Let them ask you for it one piece at a time, but have it with you and ready to present.
Your personal information includes your social security number, age, number of years of schooling, marital status, number and age of dependents, and your current address and telephone number. If you've lived at your current address for less than two years, be ready to provide your addresses for the past seven years.
You'll also be asked for your current housing expenses, including rent or mortgage payments, real estate taxes, homeowners insurance, and the name and address of your landlord(s) or mortgage lender(s) for the past two years.
Your employment history and income sources are going to be very important in qualifying for a mortgage. Lenders need to make sure you can make regular monthly payments to repay your mortgage loan, along with the other costs associated with owning a home. So, they're going to require detailed information about your employment and other sources of income, including:
At least two years of verifyable employment history. This information should include your employer's name, address, telephone number, your job title or position, how long you held the job, and all financial information including salary, bonuses, commissions and average overtime pay. The mortgage lender will mail a form to your employer and previous employers (if you've held your current job for less than two year) to verify the information you provide.
The mortgage lender is going to need pay stubs and W-2 forms. The pay stubs should be from recent paychecks; W-2 forms for the last two years. Many lenders will require copies of your entire federal tax return, depending on your situation.
If you are self-employed, be prepared to provide complete tax returns and financial statements for the last two years, along with a profit-and-loss statement for the current year.
The lender will ask for a written explanation if there are gaps in your employment. If for any reason, like illness, layoffs or other factors, there are gaps in your employment record over the past two years, be prepared to provide your lender with this written explanation.
The lender will also want any records of dividends and interest received from any investments. The form 1099s provided annually for your tax records are ideal for fulfilling this requirement. If this doesn't apply to you, then don't worry about it and just say "none" when asked about investments of this type.
You'll need proof of any other income you rely upon. This can include rental properties, social security or disability payments, child support, and so on. Proof of these sources of income could be canceled checks, copies of leases, certification of benefits, divorce decrees, or other written evidence. You do need something in writing though.
Your lender needs to know the personal assets available to you, so you should be ready to furnish information about bank accounts, investments and significant pieces of property, including:
Show proof of all your bank accounts. These should include checking, savings and money market accounts. For each account, be prepared to provide the name and address of the institution, the name(s) on the account, the account number and the current balance.
You will be asked to sign a form that will be sent to your bank(s) to verify the information you provide. If there are differences, you'll have to account for them, so be sure you provide correct balance information.
Plan on providing statements for at least the last two months.
Be prepared to provide the current values of stocks, bonds, CDs and other investments, including mutual funds as well (available from newspaper stock tables).
Tell the lender your vested interest in retirement funds, including any IRAs, SEP-IRAs, Keogh plans or other personal or company-maintained retirement funds (available in annual or quarterly reports from your retirement fund).
If you have life insurance information, including the face amount and cash value of life insurance policies in force (available in annual or quarterly reports from your insurance company, or from the policy), your lender will want this information too.
Lenders will want automobile information, including the make, model and year of any vehicles you own.
Lenders are looking for all real estate information. The address and market value of any properties you own, along with the rents collected, the mortgage on the property and the monthly mortgage payments. A profit-and-loss statement is required for investment properties.
Be prepared to give the fair market value of significant personal property, including furniture, artwork, jewelry, photographic or computer equipment, and the like.
Your lender will also want to know where you will get the funds for your down payment, closing costs and other fees. Gifts may be used for this purpose, but must be verified in writing (and that includes gifts from relatives). If you're providing less than five percent of the sales price in down payment, the gift must come from a relative, along with a letter stating the person's relation to you, the amount of the gift and that no repayment is expected. It must be signed and dated.
Just as your lender needs to know what assets you have, they will want to know how much your liabilities are, what you owe, and about your credit history. You should be prepared with the following information:
An itemized list of current debts. This list will include all current bills you owe and loans you may have: automobile loans, bank and credit union loans, any existing mortgages or home equity loans, and outstanding balances on credit cards such as Visa/MasterCard/any credit cards in your name. Debts also include any alimony, child support or maintenance payments you're required to make. You should include all unsecured debt here (credit cards, mediacl bills owed, signature loans owed, etc.).
For each separate account or loan on your list, you should include the account or loan number, the monthly payment (if fixed), the number of payments remaining and the outstanding balance.
Credit report. You do not need to provide your lender with a credit report, but your lender will get one independently to verify the information you provide. And any differences between what you tell your lender and what's in your credit report will have to be resolved before your mortgage can be issued. For that reason, some home buyers may want to order a credit report for their own review before they complete their application. That way, if there are any errors or discrepancies you can take steps to correct them.
If you have any reason to believe your credit report may contain incorrect information, you should make every effort to correct it before you make your application. You can order a copy of your credit report by contacting one of the three major credit bureaus: TRW, Equifax, and Trans Union.
If you've have credit problems, do not try to hide them. Tell your lender candidly, and explain what happened. Lenders recognize that there are many legitimate reasons for difficulties with credit, such as unemployment, illness, marital problems or other difficulties. Provide a written explanation of the circumstances to your lender, and your explanation will be considered during the approval process.
Generally, if the problem has been corrected and your payments have been on time for a year or more, your credit will probably be considered satisfactory. However, chronic late payments, loan defaults or judgments against you may damage your credit standing and prevent you from obtaining your mortgage. If you have been through bankruptcy proceedings within the last seven years, you should be prepared to provide complete details along with supporting documents regarding your bankruptcy and the reason behind it.
Once you and your lender have completed your application (or just you, if you're doing it yourself), you will be asked to certify the information with your signature. You must also promise to notify the lender of any important changes in your status.
Finally, you agree that your lender can verify the information you've provided by making contact with all people and agencies you've listed, and agree to allow them to submit your account history to credit reporting agencies.
In addition, you'll be asked for information on your race and gender. This is used by the federal government to monitor compliance with fair housing and equal credit opportunity laws. Even though your lender is required by law to ask for this information, you don't have to provide it. Iit's strictly voluntary on your part and will have no effect on your loan application.
Most lenders ask applicants to pay for the credit report and appraisal at the time the application is completed. These fees are generally less than $500.
http://debt-education.org
Friday, July 02, 2004
Credit Score Facts & Fallacies
sponsored by http://debt-education.org
-------------------------------------------------------
Fallacy: My score determines whether or not I get credit.
Fact: Lenders use a number of facts to make credit decisions, including your FICO score. Lenders look at information such as the amount of debt you can reasonably handle given your income, your employment history, and your credit history. Based on their perception of this information, as well as their specific underwriting policies, lenders may extend credit to you although your score is low, or decline your request for credit although your score is high.
Fallacy: A poor score will haunt me forever.
Fact: Just the opposite is true. A score is a "snapshot" of your risk at a particular point in time. It changes as new information is added to your bank and credit bureau files. Scores change gradually as you change the way you handle credit. For example, past credit problems impact your score less as time passes. Lenders request a current score when you submit a credit application, so they have the most recent information available. Therefore by taking the time to improve your score, you can qualify for more favorable interest rates.
Fallacy: Credit scoring is unfair to minorities.
Fact: Scoring considers only credit-related information. Factors like gender, race, nationality and marital status are not included. In fact, the Equal Credit Opportunity Act (ECOA) prohibits lenders from considering this type of information when issuing credit. Independent research has been done to make sure that credit scoring is not unfair to minorities or people with little credit history. Scoring has proven to be an accurate and consistent measure of repayment for all people who have some credit history. In other words, at a given score, non-minority and minority applicants are equally likely to pay as agreed.
Fallacy: Credit scoring infringes on my privacy.
Fact: Credit scoring evaluates the same information lenders already look at the credit bureau report, credit application and/or your bank file. A score is simply a numeric summary of that information. Lenders using scoring sometimes ask for less information or fewer questions on the application form for example.
Fallacy: My score will drop if I apply for new credit.
Fact: If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called inquiries) will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.
sponsored by http://debt-education.org
-------------------------------------------------------
Fallacy: My score determines whether or not I get credit.
Fact: Lenders use a number of facts to make credit decisions, including your FICO score. Lenders look at information such as the amount of debt you can reasonably handle given your income, your employment history, and your credit history. Based on their perception of this information, as well as their specific underwriting policies, lenders may extend credit to you although your score is low, or decline your request for credit although your score is high.
Fallacy: A poor score will haunt me forever.
Fact: Just the opposite is true. A score is a "snapshot" of your risk at a particular point in time. It changes as new information is added to your bank and credit bureau files. Scores change gradually as you change the way you handle credit. For example, past credit problems impact your score less as time passes. Lenders request a current score when you submit a credit application, so they have the most recent information available. Therefore by taking the time to improve your score, you can qualify for more favorable interest rates.
Fallacy: Credit scoring is unfair to minorities.
Fact: Scoring considers only credit-related information. Factors like gender, race, nationality and marital status are not included. In fact, the Equal Credit Opportunity Act (ECOA) prohibits lenders from considering this type of information when issuing credit. Independent research has been done to make sure that credit scoring is not unfair to minorities or people with little credit history. Scoring has proven to be an accurate and consistent measure of repayment for all people who have some credit history. In other words, at a given score, non-minority and minority applicants are equally likely to pay as agreed.
Fallacy: Credit scoring infringes on my privacy.
Fact: Credit scoring evaluates the same information lenders already look at the credit bureau report, credit application and/or your bank file. A score is simply a numeric summary of that information. Lenders using scoring sometimes ask for less information or fewer questions on the application form for example.
Fallacy: My score will drop if I apply for new credit.
Fact: If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called inquiries) will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.
