Components
of the Mortgage Application
Collateral:
The
reason that mortgage money is the lowest cost of financing available to
you is that it is secured by your home.
The
first thing a lender is going to do is to have the house appraised. They
need to confirm that the price you agreed upon for the house is no higher
than its market value.
The
lender is interested in the value being high enough not only to cover the
amount of the mortgage but the full purchase price. Their decision to lend
you the money will be partially based on the amount of your cash committed
to the purchase.
Income:
Your
ability to make the mortgage payment is a major consideration to both you
and the lender.
In
calculating your income the underwriter will be looking for:
-
Self-employed?
Receive any form of commissions or bonuses? Work regular overtime? If
so, a 2-year history of this income will be required.
-
Salaried
employees will need to demonstrate a 2-year work history.
-
Any
installment debt will be added to your housing expenses to make sure
you can afford the purchase.
Credit:
In
addition to your ability to pay, the lender will look at your
willingness to pay.
A
credit report will be done on you and the underwriter will be looking
for:
-
The
number of credit items that appear.
-
The
number and frequency of late payments (if any).
-
The
number of inquiries on your report.
-
Your
credit scores.
-
Non-traditional
credit reports, if you are not a user of credit.
Assets:
Where
is the downpayment and closing costs coming from? How much money will you have left after closing?
The
underwriter will be looking for:
-
Your
total amount of cash on hand.
-
Your
saving pattern leading up to the application and through the closing.
-
How
much will be left after you move into your new home.
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