Applying For A Home Mortgage

Thu, 28 Jan 2010 23:12:06 EST

With the recent collapse of the U. S. Financial markets, obtaining a home mortgage can now be quite a chore. Long gone are the days where a 620 FICO score, verifiable income, and a promptly paid previous or current home mortgage were just about all you needed to get a new mortgage. We are truly in a different world when it comes to finance.

That's not to say that lenders are refusing everyone. It does, however, take almost perfect credit and larger than normal down payments. It also requires plenty of backup documentation to verify everything on your application. No more 'no verification' loans!

Another thing you won't find any more is the ability to borrow extra money to pay off your debts. In the past, if your debt to income ratio was too high, banks would add this on top of the amount needed for the mortgage. This is now almost unheard of. If you owe too much money, you most likely won't qualify for the mortgage.

If a 20% down payment will be an issue, you might find yourself priced completely out of the market. Even though housing prices have fallen dramatically over the past few years, your median priced home in most markets is still hovering around $200,000, bringing your down payment alone to $40,000. This doesn't even take into consideration closing costs and residual cash the lender expects you to keep on hand for emergencies.

If you believe you have what it takes to get the house you want, you'd better be very prepared before filling out the actual paperwork with a lender. Not only do lenders have different requirements, they also have different definitions. For instance, one lender defines 'income' as your 'adjusted gross income' from your previous year's tax statement. Considering this figure could actually be 0, it would be almost impossible for anyone to ever qualify for a lone with this company.

As opposed to only a few years ago when banks merely asked for three months of bank statements to prove a reliable income stream, they now ask for one to two years of statements. This actually could be to your benefit since if you had a few months with decreased income due to a layoff or similar situation, it gives you the chance to show a recovery period afterwards. If you don't tend to keep your bank statements for long, see if you can print them out from online or pay a fee and have the bank send you duplicates.

Collect statements from all accounts including savings, money markets, annuities, and brokerage accounts. No matter how confident you are that you will easily be able to pay your mortgage, your lender wants proof positive. This level of preparation is key to your approval.

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Applying For A Home Mortgage