Although the financial markets have tightened lending guidelines and financing re
quirements over the last few years, the right advice when applying for your loan can make a big difference.
Not all loans are approved. And even when they aren't approved immediately, it doesn't have to be the end of your real estate dreams.
There are many reasons why a mortgage loan for the purchase of your real estate could be declined.
Here are a few things to understand and prepare for when applying for a mortgage:
Loan-to-Value Ratio
The loan-to-value ratio (LTV) is the percentage of the appraised value of the real estate that you are trying to finance.
For example, if you are trying to finance a home that costs $100,000, and want to borrow $75,000, your LTV is 75%.
Lenders generally don't like a high LTV ratio. The higher the ratio, the harder it normally is to qualify for a mortgage.
You can positively affect the LTV by saving for a larger down payment.
Credit-to-Debt Ratio
Your credit score can be affected negatively, which in turn affects your mortgage loan if you have a high credit-to-debt ratio.
The ratio is figured by dividing the amount of credit available to you on a credit card or auto loan, and dividing it by how much you are currently owe.
High debt loads make a borrower less attractive to many lenders.
Try to keep your debt to under 50% of what is available to you. Lenders will appreciate it, and you will be more likely to get approved for a mortgage.
No Credit or Bad Credit
Few things can derail your mortgage loan approval like negative credit issues.
Having no credit record can sometimes present as much difficulty with your loan approval as having negative credit.
With no record of timely loan payments in your credit history, a lender is unable to determine your likelihood to repay the new mortgage.
Some lenders and loan programs may consider other records of payment, like utility bills and rent reports from your landlord.
Talk to your loan officer to determine which of these issues might apply to you, and take the steps to correct them.
Then, you can finance the home of your dreams.
Please Provide the Following Documentation
EVERY DOCUMENT REQUESTED IS NEEDED!
Standard Income Documentation:
2 years W-2’s AND Previous 2 Federal Income Personal Tax returns. ALL pages/ALL Schedules
If self-employed 2yr’s Corporate tax returns and K1s. ALL schedules All Pages. (If you own more than 25% of a company you are required to provide Corporate returns these include)(Corp. Sched. 1120s) (LLC sched. 1065)
2 weeks’ pay stubs (Please keep providing me with them up until the day we close).
2 months bank statements (please provide ALL PAGES even if they are blank). (Please keep providing me with them up until the day we close).
Proof of assets (i.e.: 401k, annuity, mutual fund, IRA, CD etc…) (All PAGES even if they are blank). (Please keep providing me with them up until the day we close).
2 forms of ID (Most common driver’s license social security card).
Copy of mortgage statements (Most current statement).
Copy of home owner’s insurance declaration page (Has agents name, phone number, policy number and your premium amount).
Tennant Leases (IF Multi-family)
Signed disclosures (please sign and date ALL PAGES ALSO PLEASE DO NOT CROSS ANYTHING OUT).
If you own any properties currently we require the following documents
Copy of mortgage statements for (ALL properties owned).
Copy of home owner’s insurance declaration page (for ALL properties owned).
Copy of home property tax statements (for ALL properties owned).
ALTERNATIVE INCOME DOCUMENTS
The following forms of income are acceptable:
Pension, Social Security, and Disability
Must provide 2 of the following items
Award letter (For social security or pension).
Bank statements showing deposits (Showing the social or pension being direct deposited).
Copy of check stubs (Copy of cancelled stubs from social security).
Purchase Information
Copy executed purchase and sales agreement. (Signed by all parties).
Deposit to the seller at the time of contract. (Please provide proof of this we are going to need the cancelled check. Also need bank statement showing the money coming out of the account).
Bank Statement showing the money where the down payment that you are putting down on the house is coming out of. (Need to have that account on hand).
Verification of Rent or 12 months cancelled rent checks or rent free letter. (I will let you know which applies for you).
Gift Letter (Only if this applies to you. We provide you the form).
Reduced Doc Loans
Accountants Letter: To state the following. (Keep in mind this is an example so please use real numbers and your own whatever they may be). This writing is to confirm that for that I have been ABC’S Company account or CPA for the past 11 years, during that time ABC Company has been self-employed in the construction industry. He has 100% ownership of his business. ABC Company and he have filed his business and personal tax returns in such capacity. ABC Company is located at 123 ABC Street in Brooklyn NY 11566 and has been in business for 21 years. Please do not hesitate to contact me with any questions or concerns.
Thank You
Mr. Accountant
Miscellaneous Documentation
Divorce Decree & Settlement Agreement (If you’re receiving child support of alimony please let us know and provide proof we can give you credit for that and it can be used as positive income).
Bankruptcy (Please provide the Discharge Notice, Filing and Schedule of Creditors).
If you are NOT a US citizen, provide a copy of your green card (front & back). If you are NOT a permanent resident (Provide a copy of your H-1 or L-1 visa).
If you are requesting cash out refinance loan, provide a letter explaining how you will use the refinance proceeds.
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