Most lenders require credit history, appraisal

REAL ESTATE MAILBAG

May 29, 1994|By Michael Gisriel

Q: I recently decided to buy a home after renting for several years. I called several lenders and each lender asked for the same documents. I was surprised at the amount of documents needed. When I purchased my car, they ran a credit report and gave me the loan within one hour. Why does a bank need so

many documents for a home purchase?

J. Woody, Severna Park

A: Most mortgage lenders follow guidelines set by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corp. (Freddie Mac). Both require three areas to be documented:

First, the ability to pay the mortgage. This includes showing the amount of your current gross income, monthly debt payments, and the amount of cash you have available for this home purchase.

VTC Second, willingness to pay. This is a credit report that covers the last seven years of credit history from three credit repositories and public records for the last 10 years. The public records section will show any liens, judgments and bankruptcy.

Third, appraisal on the home. This is done to confirm that the value of the home is equal to or greater than the purchase price.

Although there are more documents and verifications you must supply to the mortgage lender, the more documents you supply at application, the shorter the time to obtain mortgage approval. The lender for your car is relying on your credit history from one source as well as your common sense not to commit to a car payment higher than you can pay.

Q: My wife and I have retired and have decided to purchase a home. Can we use our Social Security and retirement income to get a mortgage?

P. Zimmerman, Annapolis

A: Yes. A mortgage lender will need to see your Social Security Award Letter and proof that you are receiving this income. Ask your lender what documentation is needed for retirement income.

If the Social Security and retirement income is nontaxable, your lender should calculate what the equivalent taxable gross income would be, and then use that to calculate the expense-to-income ratios that determine whether you qualify for a loan.

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