Good records speed approval of mortgages

STARTING OUT

January 23, 1994|By Dian Hymer

How do I get a home loan approved?

Loan approval depends on three factors: the property appraisal, your credit history and your loan application.

Buyers often balk at the amount of documentation that today's lenders require before they will process a loan. It will help if you provide as much of the essential paperwork as you can when you first meet with your loan agent.

Most lenders will need copies of W-2s for the past two years and copies of paycheck stubs for the past 30 days.

They will need your employment history for the past two years, including addresses for verification and an explanation in writing of any gaps in employment.

Self-employed individuals will need to supply complete copies of their federal tax returns for the past two years, along with a year-to-date profit-and-loss statement and a current balance sheet.

In addition to verifying your income, the lender will need to verify the source of the funds needed to close (down payment and closing costs) and your debts. Compile three months' worth of statements for all checking, savings, IRA, stock brokerage, money market and other asset accounts, including addresses, account numbers and balances. The lender wants to know not only where your money is, but how long it has been there and where it came from. If your parents are giving you part of the down-payment money, they will need to provide a gift letter that stipulates that the money doesn't have to be repaid.

Compile a list of all outstanding debts (credit cards, student loans, etc.), with addresses, account numbers, current balances and payment amounts.

The lender will need a copy of the purchase agreement. If you are buying a condominium, the lender will require information about the homeowners' association: copies of the covenants, conditions and restrictions, the articles of incorporation and the bylaws.

Divorced borrowers will need to provide a final copy of their settlement agreement. And if you're relying on child support or ,, alimony, the lender will want you to verify the last 12 months of payments received.

After you have completed a loan application and assembled the necessary documentation, your loan agent will submit the package with the property appraisal and your credit report to the underwriting department. The underwriter reviews the documents to determine the level of risk involved in approving the loan. After underwriting, the loan package is submitted for formal loan approval.

Don't be surprised if your loan approval has conditions attached to it. Many times, the conditions are petty, like requiring a legible copy of an addendum to the purchase contract.

But if there is a major condition of loan approval, such as providing a copy of a building permit that you don't have, be certain that you don't unconditionally remove your financing contingency from the purchase contract until this condition is satisfied.

FIRST-TIME TIP: To simplify the loan process, be completely candid with your loan agent at the time you submit an application.

If there are skeletons in the closet, like a blemish on your credit report, let your agent know this right away so that the problem can be resolved in time.

THE CLOSING: It's risky to falsify information on a loan application. Most loans require the borrower to sign a form that authorizes the lender to get copies of your tax returns directly from the Internal Revenue Service. If the lender discovers that you used a phony tax return to get a loan, the lender can demand instant repayment of the entire loan and could file criminal charges against you.

Dian Hymer's column is syndicated through Inman News Features. Send questions and comments care of Inman News Features, 5335 College Avenue, No. 25, Oakland, Calif., 94618.

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