Thursday I began this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" which is a follow up to a blog I did on Tuesday about the need for Buyers to be Pre-Approved for a loan "Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter", and the process that should be followed. In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, they have to complete a full Loan Application (1003). Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.

As I stated Thursday one of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4. Each question on the Declarations Section VII Of Loan Application only requires a YES or NO answer, and maybe that is why it does not seem to be given the same level of attention as other parts of the Loan Application.

Since Thursday I have covered the first 6 question on Declarations Section VII Of Loan Application, and today I will cover the next 3 questions, and continue to explain why these Questions Must Be Asked On The Declarations Section VII Of Loan Application and there importance. The seventh question on Declarations Section VII Of Loan Application states:

• g.  Are you obligated to pay alimony, child support, or separate maintenance?

This question is very clear and self explanatory, but unless asked Borrowers do not volunteer this information. Some even try to hide it  which is very foolish, because alimony, child support, and separate maintenance payment can significantly raise the Borrowers Debt-To-Income Ratios.  It is also relatively easy to find out if a Borrower is paying paying alimony, child support, or separate maintenance. 

First of all it is in many cases deducted right out of the Borrowers paycheck, so once they provide a copy of their paycheck, which is required with every loan these days, there it is.  Bank Statements are also required and it can pop up there, as well as on Tax Returns if they claim it as a deduction.  But there are also red flags that are raise during the course of taking a Loan Application.  One of the questions on page #1 is do you have any dependent children.  If dependent children are listed there, and the Borrower claims to be unmarried, or separated the Underwriter is going to ask for an explanation.  Another red flag is the Credit Report.  If the Borrower has a previous mortgage, even if it is paid, and it shows up on the Credit Report as a Joint Mortgage, an explanation will be asked.  If the explanation is that they were previously married, then the Underwriter is going to want to see a copy of the divorce decree, and the alimony, child support, or separate maintenance will show up there.

So to answer this question NO when it it really YES is foolish, because there is a very good chance that it will be picked up, and once they catch you not telling the truth, they are going to start questioning everything.  And if it is some how missed during the Underwriting Process, but discovered later after the loan closes, the loan could be Called.  Also they could face criminal charges for lying on the Loan Application. This is because at the bottom of Page #4 Borrowers have to sign attesting to the fact that all of the information that they have provided is the truth to the best of their knowledge.

• h.  Is any part of the downpayment borrowed?

This is important because it will not show up initially on the Credit Report, but is a future additional debt that will impact the Borrowers Debt-To-Income Ratios.  It is especially important for the Borrower to answer this question correctly if they plan on doing a Bridge Loan for the Downpayment while they are trying to sell an existing house.  In this case it will definitely be found out, because the Bank doing the Bridge Loan will contact the Bank doing the First Mortgage.  It is best to see what that additional payment will do early on to the Debt-To-Income Ratios.  By taking this additional payment into consideration early, we can avoid the loan being denied late in the process, because the Debt-To-Income Ratios are now to high, or the Borrower does not qualify for a Bridge Loan, and now does not have enough money to Close.

• i.  Are you a co-maker or endorser on a note?

This questions just like the previous question can create Debt-To-Income Issues as well, and cause problems late in the Loan Process if it some how does not show up on the Credit Report, but surfaces before or after the Loan Closes.  Not answering either of these two questions correctly because you think that it will not be discovered is a BAD idea, could raise other issues, and end up being a big waist of every ones time, as well as prove to be a very costly experience for the Borrower.

This now brings us to the last four questions on Page #4 of the Declarations Section VII Of Loan Application, and to some seemly very Innocent question.  We will begin to see tomorrow that they are not so Innocent.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com