Once
a simple task that meant
comparing the fixed interest
rate mortgages of a dozen or so
lenders, the mortgage
search today is more like
finding your way through a maze.
There are dozens of loan
types, hundreds of loan programs
and thousands of mortgage brokers,
bankers, lenders, finance
companies, credit unions, even
stock brokerage firms originating
loans. In attempting to approve
home buyers for the type and
amount of mortgage they want,
mortgage companies basically
look at two key factors: the
borrower's ability and
willingness to repay the loan.
Ability to repay the mortgage is
verified by your current
employment and total income.
Generally
speaking, mortgage
companies prefer for you
to have been employed at the
same place for at least two
years, or at least be in the
same line of work for a few
years. The borrower's
willingness to repay is
determined by examining how the
property will be used. For
instance, will you be living
there or just renting it out?
Willingness is also closely
related to how you have
fulfilled previous financial
commitments, thus the emphasis
on the credit report or rent and
utility bills.
It is important to remember that
there are no rules carved in
stone. Each applicant is handled
on a case-by-case basis. So even
if you come up a little short in
one area, perhaps one of your
stronger points will make up for
the weak one. Everyone involved
in real estate is in the
business of selling homes, in
one way or another. Therefore,
if the loan makes sense,
mortgage companies and insurers
will do their best to see that
you qualify.
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When
most people think about
choosing a mortgage company,
they think about finding the
lowest rate. Period.
Of
course, financial
considerations are important
to every home buyer, and you
certainly should consider the
different rates lenders in
your area offer on comparable
loans.
For your
first meeting with the
mortgage company, you should
bring:
A purchase
contract for the
house (if you have
one)
Your bank
account numbers and
the address of your
bank branch, along
with checking and
savings account
statements for the
previous 2-3 months
Pay stubs,
W2 withholding
forms, tax returns
for two years, or
other proof of
employment and
income verification
Divorce
settlement papers,
if applicable
Credit card
bills for the past
few billing periods,
or canceled checks
for rent or utility
bill payments, to
show payment history
and amount of
revolving debt
Information
on other consumer
debt such as car
loans, furniture
loans, student loans
and retail credit
cards
Balance
sheets and tax
returns, if you are
self-employed
Any gift
letters, if you are
using a gift from a
parent or relative
or other
organization to help
pay the down payment
and/or closing
costs. This letter
simply states that
the money is in fact
a gift and will not
have to be repaid.
Having
these items on hand when you
visit the mortgage company
will help speed up the
application process. Usually
an application fee and the
appraisal fee will have to be
paid when you submit the
mortgage application. This is
only done after you have
successfully negotiated on a
home and have had your offer
accepted by the seller.
Generally, there is no fee for
pre-qualification.
After
the initial meeting with the
mortgage company, you should
have a general idea if you
qualify for the size and type
of loan you want. The mortgage
company should let you know if
you qualify for the loan
within days. If you are denied
a home loan, the mortgage
company must explain the
reasons. If this happens, the
mortgage company will usually
discuss any options with you.
Your
mortgage company will begin
the work of verifying all the
information you've provided.
This process can take anywhere
form one to six weeks,
depending on the type of
mortgage your choose, whether
you're buying a home outside
your local community, and
other factors.
Within
three business days after your
application, the mortgage
company must give you an
estimate of your closing
costs. (The closing is the
actual settlement of your
loan.) You'll also get a
statement that shows your
estimated monthly payment, the
cost of your finance charges,
and other facts about your
mortgage.
For many
home buyers, this waiting
period can be nerve-wracking.
So stay in touch with your
mortgage company, be prepared
to answer any questions that
might come up -- and remember
that mortgage companies are in
the business of making loans,
not denying them.
Some
homebuyers find the closing
process to be one of the most
intimidating aspects of buying
a home because it's so
unfamiliar. Ask your mortgage
company what to expect at your
closing.
