Mortgages
Mortgage Application Tips
Get a comfortable table or desk
and spend the time to fill out your mortgage application neatly and correctly.
If you are given a paper application at the bank or credit union, ask permission
to bring it home and complete the application when you are not under pressure,
and have all of your documents handy. If you are doing it online, use extra
caution, watching out for mistypes, misspellings and make sure that you
put the correct info into the correct form fields.
One way to smoothly go through
the mortgage application process is to create your own application package
approximately one year and no later than six months prior to applying for
a residential mortgage loan. Gather all of your information, check your
credit report and that way you can be aware of any surprises before you
speak to a lender. Here are some of the things you should prepare during
this period:
List of debts
Make sure you know exactly
how much you owe and to whom the money is owed. If you are married or you
are purchasing the home with a partner, help of a parent or some other
second party, everyone should be aware of the total sum of all individual
and joint debts.
Gather your documents for
auto loans, school loans, personal loans, other mortgage payments, alimony
payments, child support payments, credit cards and any other type outstanding
debt. Create a master list with all of the items, account numbers, addresses,
amounts owned, interest rates and monthly payments.
If you can pay off a significant
portion of any one medium to large debt perhaps you should consider waiting
an additional year before applying for the loan.
Recent addresses
If you have moved recently
or have been upwardly mobile for a while, it can be difficult to remember
all the addresses, apartment numbers and cities where you lived. Your address
history should also be on your credit report, but you need something else
such as old statements or information from your address book to make sure
that your credit report is accurate.
Credit Report
Get a copy of your credit
report from all three credit bureaus. Check the information from each report
against your records and also against each other. Sometimes when an outstanding
debt has been paid or settled, and you get out of debt, the information
might be sent to only one bureau. Call your lender and ask if and when
they information will be provided to the credit bureau.
Then, follow up with the credit
bureaus to make sure the information has been added to your file. What
type of information are you looking for: social security numbers, addresses,
dates on accounts, opened accounts, closed accounts, outstanding debts,
negative information that is incomplete or inaccurate.
List of assets
Frankly, how much are you
worth? Do you have any stocks, bonds, savings accounts, retirement plans
or own another home? Again, create a master list with the items, account
numbers, worth or potential worth if liquidated and addresses or contact
information.
If you are planning to sell
any type of asset to use the money as down payment, try to complete the
sale at least six months prior to filling out your mortgage application.
Mortgage lenders always want to see that you have the money on hand for
all of the costs associated with getting a mortgage. They generally look
down on last minute buying and selling to come up with your cash. They
want a snapshot of your current financial situation going back at least
six months.
Supplemental paperwork
If you are getting alimony
or child support payments and want this to be included in the calculations
prepare the documentation to show how much money you are receiving and
projections for how much you think you ll receive in the future.
Bankruptcies and foreclosures
Your lender will be able to
find out just about everything they want about your financial history so
don t try to hide foreclosures and bankruptcies. Just make sure the information
is accurate. Gather all of your paperwork including dates, settlements
or outstanding balances at the time the debt was discharged and keep it
handy.
Employment History
Collect W-2 forms for the
last 2 to 3 years that show your employment history and income. As with
your payment habits, try not to make any sudden job changes within the
6 months to 1 year period prior to applying for the loan. Income changes
look especially suspicious. If you experience a sudden dramatic increase
or decrease in income be prepared to provide a full verbal or written explanation
along with your paperwork.
Remember that the purpose
of all this data collection is to make sure that you have the most accurate
and update picture of your financial history to make the mortgage application
process smooth and easy.
At times your mortgage application
might be turned down. The possible reasons with some suggestions are mentioned:
The US finance market uses
sophisticated credit searching and credit scoring procedures to determine
each applicant s credit worthiness. Vast databases are maintained by credit
reference agencies listing current and past misdemeanors - how you have
conducted your previous borrowing arrangements will affect future applications
for finance such as loans, mortgages and credit cards. Any late payments,
missed payments or arrears will lower your credit score, particularly if
they are recent.
Most high street mortgage
lenders do not want customers who have an imperfect financial past. Their
computer systems are set to reject applications from people who have credit
problems listed as they pose a higher risk.
In the past these lenders
have offered mortgages with high fees and interest rates to borrowers who
had few other options. But recently new lenders have come into an expanding
non-conforming market with much better interest rates and terms and they
are being closely followed by some of the larger lending institutions.
The mortgage options available for a non-conforming borrower are now actually
very good with a reasonable risk margin being charged through
slightly higher interest rates.
An experienced Independent
Mortgage Broker will probe extensively into your financial affairs and
ask about past credit problems. Gaining a copy of your credit report from
a credit agency will enable your broker to more accurately assess any problems.
Once all of the facts have been established your broker can begin to search
for the best lender and the best interest rate package. They will then
also continually liaise with the new lender to ensure your mortgage application
progresses as smoothly as possible.
If all goes well, in a few
years time your credit profile will have improved and you should be able
to re-mortgage onto a normal mortgage rate, which will almost
certainly be cheaper.
Author-Bio: Suvadip Das is
a research fellow in management and a web developer. Web design is his
passion. He works for Freelance Writer Organization and various websites
including http://www.super-mortgages.com
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