This month's bizarre holiday; National Puzzle Day! -What does that have to do with Loans?

This month's bizarre holiday; National Puzzle Day!

Puzzles are a favorite pastime for millions of people, young and old; National Puzzle Day honors puzzles of all size, shape and form. Whether you're into crosswords, jigsaws, or even a simple word search - doing puzzles is fun! For some, they enjoy the challenge, for others it's a way to kill time - either way, puzzles keep your mind sharp.

What do puzzles have in common with Real Estate Lending? - Everything! 

When a lender receives a loan application - it is like putting together a puzzle.  The final loan package submitted to underwriting is comprised of lots of picture pieces... income, credit, liabilities, assets, property. 

1. Let's look at income:  Income comes in many shapes and sizes.  Salary, salary with overtime; hourly, hourly with time and a half, hourly with shift differential.  Income with bonus pay; salary base with commissions; all commission.  Self employed, sole proprietors, self employed - by their S-corp, partnership or corporation. - Sometimes income is a combination of several of the aforementioned!  Each income type will have variances on the type of supporting documentation required for the final underwriting phase.
2. Credit:  The credit profile begins with the credit scores for each borrower.  If the customers are married, then the type of loan will dictate how scores are handled (as well as liabilities).  Is there a BK, if so how long has it been? Foreclosure or short sale?  Late payments, judgements, collections (out dated but on the record).
3. Liabilities;  Are there co-signed loans? Who pays, is there tracking documentation for the last 12 months to document? How many mortgages, rental income to offset payments, student loans (deferred) imputed payments due.. - Ah, to ratio's.
4. Assets;  Where are the funds for down payment and closing costs coming from?  All monies to be invested need to be documented (tracked).  Were there any large deposits in the bank?  If so, where did they come from? Repayment of a personal loan? - Is there documentation of the loan having been made...?  Will the funds be coming from a gift? - There is specific criteria on how to handle gift funds.  Is there down payment assistance from a non profit or public source?
5. The property;  Does the appraisal support the sales price?  Is the property sound? - Are there any health or safety hazards involved, is the house standing only due to the termites holding hands?  Are there permits for the room addition or remodel?

So you see, when a loan application is made... there are many things that go into putting the picture together for final loan approval.  That is also why it is helpful to work with a knowledgable loan consultant... and it is no less important is that the customer is open and forthcoming when reviewing the written application with the lender.  Withholding information from your lender to keep from complicating your transaction will only insure complication... typically at the last minute resulting in a stressful closing or an escrow "fall out".