Things to know before applying for a home mortgage loan

Article Submitted by Home Mortgage Loans Blog
Home Mortgage Loans can be complicated and banks may have tough requirments since the housing bubble crash caused many homes to go upside down on their loans. Unless you know all the requirments before hand, you should probably not look for thar house just yet. This stage can be much less stressful if you understand and are prepared for the process. We hope this article will be helpfull to you.

APPRAISAL
Before you make an offer or apply for a loan, make sure that the house you are buying is valued according to the market comps. The banks value homes based on comparison (comps) of recent houses sold in the area. A good real estate broker could provide you such comps or you could use sites like zillow.com, which may give you very close estimated values. Most banks will not consider improvements to the house in their appraisal evaluations, or may give it 1/10th of what the actual value of the improvement is. So if the house you are buying is in a much better shape than the neigborhood houses and has extras, you are out of luck, becuase the bank may not consider that in their appraisals. If a house appraisal comes back below what you paid for, it does not mean that you would not qualify for a loan, but it may just mean that you may have to put additional down payment.

THE APPLICATION
Your loan application is often your only communication with those who may be willing to invest a lot of money in you. The longer it takes for you to be approved for a loan, the more likely something may go wrong such as interest rates going up or the property being damaged. so you will want to do everything you can to make the process speedy.

HOW MUCH CASH?
Mortgage lenders require home buyer to prove they have enough cash to cover the down payment , closing costs, fees, and any moving expenses there may be. Gone are days were you could purchase a house with no down. At best, with the government programs you may be go as low as 10% down. You may need to provide the lender with the past three to six months of every:
– Bank statement
– Brokerage account.
Then lenders will verify your current and average balances for the last two to six months.
The lenders may also require to see 1 to 3 years of personal and business tax returns.

HOW MUCH INCOME?
You will need to prove your ability to repay what you borrow by proving the lender with your last two pay stubs. The lender will verify your employment within the last two years and will ask your current employer about:
– Any time you may have spent unemployed during that period;
– The likelihood of any pay raises;
– Consistency of bonuses, commissions, or overtime, if applicable;
– Likelihood of continued employment.
Other income. You will want to provide your lender with year-end statements and other documents that prove:
– Income from securities or trust for which you will need to prove two years’ tax returns;
– Social Security, disability, alimony, or child support only if you want it to be considered;
– A lease agreement to prove rental income, if applicable.

CREDIT SCORE?
Very bad credit scores may mean that you may not qualify for a loan. Scores of below 620 will have very little luck, unless you bring in a co-signer or a spouse with better credit. Average credit scores (620-680) may qualify you, but your rate may be higher. Typically a score of 700 or above will be cosnidered good and may give you good rates. If your score is average, but you have had many late payments and bad credit history, it may help to explain why this happend and assure lenders that you are on top of your finances and that it will not happen again.

HOW MUCH INCOME?
Lenders will be looking at how you handle debt, and you will need to prove you’ve been a trustworthy borrower in the past. Your credit report will provide them with at least the following information.
– Your credit card statements;
– Any open credit lines from lenders such as your bank;
– Any loans such aas school or car loans and what you owe;
– Any legal judgment against you.

OTHER THINGS TO KNOW
– Typically, you’re allowed to borrow up to 50% of amount vested in your 401(k) to buy a home. Amounts vary, however, from plan to plan. There’s no set rule.
– A credit report fee and the appraisal fee are usually required when you submit the mortgage application.
– Relatives and close friends may give you cash gift for you down payment, but you may need to prove that it’s in your account and not a loan (because a loan would add to your debt).