approve your loan?Imagine if someone asked you for a $100,000 loan. What would you want to know before handing over the money? Can the person afford to pay you back? Is the person responsible with money? How will the money be used? These are the same types of questions loan underwriters
ask when a prospective buyer applies for a loan. Underwriters approve or deny a mortgage loan application based on an evaluation of:
- Your property appraisal. Your appraisal is done by an independent appraiser, and provides an estimate of the market value of the home you want to buy, based on similar homes sold in the neighborhood. An appraiser also inspects the property to evaluate its general condition and see if any repairs are needed to bring the property to its full value. Lenders generally lend you up to a certain percentage of the property value. The loan amount will be based on the lesser of the sales price or the appraisal amount.
- Your income and assets. Your current earnings, along with available funds (like bank accounts, investments or gift funds) help determine your ability to repay a loan.
- Your down payment. The down payment is the up-front cash you'll pay toward the purchase of your home, reducing the amount of the loan amount that needs to be financed. Generally, the larger the down payment, the lower your monthly payment. With a conventional loan, you can put down as little as 3%, although if your down payment is less than 20% your monthly payments will increase because you must also purchase private mortgage insurance.
- Your credit history. Lenders base part of their decision on how you've handled credit payments in the past. A report from the credit bureau shows the types of credit you've had, whether you've repaid promptly and how well you've managed the responsibilities of credit.
I strongly recommend that you request a copy of your credit report before you apply for a mortgage. That way, if you detect potential credit concerns on your report, such as incorrect information, you'll have enough time for the credit reporting agency to correct it.
To get a copy of your credit report, contact Experian at 1-800-682-7654 (formerly TRW), Trans Union at 1-800-916-8800, or Equifax at 1-800-685-1111. An $8.00 fee may apply.
2. What do you need to apply for a loan?©Copyright 1998-2008 Rock Vaughan
Contact Rock Vaughan:
E-mail rock@homemortgageguide.com
Office 301/267-8210 or 1-888-267-8765
Fax 410/267-6221
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