Most homebuyers don’t have a huge lump sum of cash lying around for a home purchase unless they have been recipients of a substantial inheritance or a winning lottery ticket. If you require a new mortgage to finance your purchase, the sales contract probably contains your promise to apply promptly at a lending institution. The real estate broker can often suggest the lender most favorable to your situation and the seller’s. Or perhaps you have already checked out several and have a comfort level with a lender who has prequalified you for a certain loan amount. Some lenders are experts at extending loans to buyers of older homes, others specialize in manufactured housing, still others, like portfolio lenders, work especially well with self-employed buyers. In some areas, the agent makes the appointment for you and even accompanies you to the application session. The application these days, however, may be as simple as a phone conversation with the loan officer (phone applications can be input into the lender’s computer, printed out, and then mailed to you for your signature). Or it may be an application online with a disembodied loan officer prompting you through the cyber loan application. If you are on your own, sit down with the Yellow Pages open to “Mortgages” and ask to speak with a mortgage counselor or loan officer. Or log onto one of the many lender Web sites and start shopping. If you are buying a new home and opt to use the builder’s in-house or preferred lender, the sales consultant will probably set up the meeting with a loan consultant. Do your own research, using the charts in Chapter 7. Come to the application session armed with as many facts as possible (see Figure 11.1). The lender will want to know a great deal about your financial situation, all aimed at not letting you get in debt over your head. The lender’s process of analyzing a mortgage application, looking over the loan package (appraisal and/or inspection of the property, verification of employment, credit report, etc.), and making a decision about furnishing the loan, is known as underwriting. Factors that lenders consider in deciding whether to make the loan are your employment stability and prospects, present assets, credit history, past mortgage experience, and present debts. Most lenders will consider all kinds of circumstances that may help to tip the scales in your favor if you remember to furnish them, like future verifiable salary bonuses or the drop-off of child-support payments by a certain date. They call these compensating factors (very much like mitigating circumstances in a court case). The lender judges two things: your ability to meet your obligations in the future and your willingness to do so, as evidenced in the past. Lenders will ask you to furnish a list of documents. Some types of loans and some lenders require more than others. Over the past few years, some lenders have streamlined the process by dispensing with employment verifications, using only buyer-furnished paycheck stubs and verified credit scores. (See the section on Credit History later in this chapter.) Figure 11.1 is a general checklist for items borrowers should prepare themselves to hand over for a complete and helpful total picture of loan worthiness. Lenders vary in the number of months for each type of statement they require, so ask ahead of time. And make copies of everything for the lender; don’t hand them your originals! |
