[知識] Qualifying for a Mortgage

[nikko]

Qualifying for a Mortgage?
What is the Difference Between Qualifications and Approval?
Can You Separate Income and Credit?
Does Paying Delinquencies Improve Credit
Do Inquiries Hurt Your Credit?
Should I Co-Sign to Help?
How Can I Take Advantage of an Equity Gift?
Are Seller Contributions Kosher?
Do I Really Need an ARM to Qualify?
What Are Documentation Requirements?
Should You Allow a Friend to Qualify With Your Account?

[nikko]

It's essential to consider how much you can afford to pay before you look for a house. Considering affordability early on will save you time and money because you won't bid on unattainable houses or apply for loans that are out of your ballpark. It will be easier to get a loan and, if necessary, you'll be able to take creative steps toward improving your financial and credit profile.

http://www.nolo.com/article.cfm/ObjectID/2614D787-A0B9-45C6-8A2BE356C1EC4389/catID/B610DF8A-B9F2-429A-8B9B77A2E203513F/213/243/ART/

Good lending institutions are very careful with their depositors' funds. They employ professional underwriters, who evaluate the degree of risk involved in loans that the lenders have been asked to make by prospective borrowers. Underwriters tell the lender how much risk is involved in lending money to you. If they determine that you're too risky, chances are you won't get the loan. Underwriting standards vary considerably from lender to lender.

Lenders constantly fine-tune the way they evaluate mortgage applications in search of better screening techniques to keep borrowers — and themselves — out of foreclosure. Lenders traditionally rely on several factors to assess prospective borrowers' creditworthiness.

Integrity

When deciding whether to give you a loan, lenders must determine that you will be able and willing to repay the mortgage debt. To ensure that you will be able to pay off the debt, lenders may look at many factors, including:

Your employment history
Your income and outstanding debt
Your savings patterns and amount of savings
The type and amount of loan you are requesting
The amount of down payment you plan to make or the equity that you have
To ensure that you will be willing to pay off the debt, lenders typically look at your credit history and credit score. Your credit score predicts how likely you are to repay the mortgage debt.

What is a credit score? A credit score is a number that indicates statistically how likely a borrower is to repay future debts.

If you have had credit problems, be prepared to discuss them honestly and come to your application meeting with a written explanation. Every lender knows there can be unavoidable reasons for credit lapses, such as unemployment, illness or other financial strains. If you have had a problem but have worked with your creditors to correct it, and your payments have been on time for a year or more, you'll probably have nothing to worry about.

Income and job stability

Lenders look at your income in several different ways—starting with the total amount. But how you earn it is also important. For example, income from bonuses, commissions and overtime can vary greatly from year to year. If these sources make up a large percentage of your income, your lender will want to know how reliable they are.

Your lender will also consider the relationship between your income and expenses. Generally, experience suggests that your fixed housing expenses (mortgage payment, insurance and property taxes, but not repairs or maintenance) should not be more than around 28% of your gross monthly income, although this is not a hard and fast rule. Your lender may also consider other long-term debts, such as car loans or college loans.

It may seem that your lender needs to know everything about you for the application, but actually all your mortgage lender needs to know about you is your employment and finances, and information about the home you’re buying. However, you will need to provide quite a few details about these topics, and your application process will go much more smoothly if you’re prepared. Be sure to ask your mortgage lender what information you’ll need to complete your application. In general, it is a good idea to bring the following when you meet with your lender:

Employment and Income Information

Your employment, salary and bonuses, and any other source of income for the past two years (bring your most recent pay stub, previous year’s W-2 forms and tax returns if possible)
The most recent account statement showing the amount of any dividend and interest income you received during the last two years
Official documentation to support the amount of any other regular income you may receive (alimony, child support, etc.)
Personal Assets Information

Current balances and recent statements for any bank accounts, including both checking and savings
Most recent account statement showing current market value of any investments you may have such as stocks, bonds or certificates of deposit
Documentation showing interest in retirement funds, if any
Face amount and cash value of life insurance policies, if any
Value of any significant pieces of personal property, including automobiles
Credit and Debt Information

The balances and account numbers of your current loans and debts, including car loans, credit card balances and any other loans you may have
The idea is to arrive at a monthly payment you can afford without creating financial hardships.

http://www.homeloanlearningcenter.com/process/qualifyingforamortgage.html

Property appraisal
Lenders must find out what the house you want to mortgage is currently worth, because the property will be used to secure your loan. They do this by getting an appraisal, a written report prepared by an appraiser (the person who evaluates property for lenders) that contains an estimate or opinion of fair market value. The reliability of an appraisal depends upon the competence and integrity of the appraiser.

A loan-to-value ratio, or LTV, is a quick way for lenders to guesstimate how risky a mortgage might be. LTV is simply the loan amount divided by the property's appraised value. If you're borrowing $150,000 to buy a home with an appraised value of $200,000, the loan-to-value ratio is 75 percent (your $150,000 loan divided by the $200,000 appraised value).

The more cash you put down, the lower your loan-to-value ratio and, from a lender's perspective, the lower the odds that you'll default on your loan. It stands to reason that you're less likely to default on a mortgage if you have a lot of money invested in your property.

Conversely, the higher the LTV, the greater a lender's risk if problems arise later with your loan. That's why most lenders charge higher interest rates and loan fees or require mortgage insurance whenever a loan-to-value ratio exceeds 80 percent of appraised value.

http://www.dummies.com/WileyCDA/DummiesArticle/id-1106.html

Down Payment
In the past, lenders expected home buyers to make a down payment of up to 20% of the asking price of their home. However, as the average price of homes has gone up, lenders have found ways to lower the required down payment, in some cases, to 10%—so you do have options if you can't afford such a large down payment.

http://www.homeloanlearningcenter.com/process/qualifyingforamortgage.html

Cash reserves
As a condition of making your loan, some lenders insist that you have enough cash or other liquid assets, such as bonds, to provide a two- or three-month reserve to cover all your living expenses in the event of an emergency. Others lenders reduce their cash reserve requirements if you have a low debt-to-income ratio or a low LTV.

http://www.dummies.com/WileyCDA/DummiesArticle/id-1106.html

[nikko]

Buying an affordable home is virtually impossible in certain housing markets across the country. Thus, many homebuyers unknowingly make offers on homes they cannot afford. Before beginning the bidding war on a potential property, it helps to have an indication of an affordable monthly mortgage payment. To receive this information, a mortgage pre-approval is necessary. Some homebuyers do not fully understand pre-approvals, and often confuse a pre-approval with a pre-qualification. However, the two processes are very different. Even if a homebuyer is pre-qualified for a mortgage loan, this does not guarantee a home loan.

What is a Mortgage Pre-Qualification?

When a homebuyer is pre-qualified for a mortgage loan, the lender will request information about current debts, income, and so forth. On the flip side, the mortgage lender will not verify the information. Thus, the potential borrower is not required to submit documentation such as tax returns, paycheck stubs, or bank statements. Based solely on stated information within the pre-qualification application, the mortgage lender will determine whether the borrower meet the requirements for a loan approval. Even so, loan approval is not definite.

What is a Mortgage Pre-Approval?

On the other hand, if a borrower obtains a pre-approval from a mortgage lender, the loan is guaranteed. Before a pre-approval is established, the lender will ask for all applicable documentations, and confirm information listed on the loan application. Borrowers must submit most recent banking statements, paycheck stubs for past three months, two year's tax returns (self-employed), assets, and debts. Furthermore, mortgage lenders will review borrower's credit history before a pre-approval is given.

http://www.associatedcontent.com/article/49254/home_buying_guide_mortgage_preapprovals.html

While your credit report could have been reviewed automatically and with your permission from an online site, the facts are that verification and other checks are required before a new mortgage is issued.

There is great value to pre-qualifying and pre-approving. At least you will have spoken with a lender and gotten an idea regarding what you can afford and what loan choices might be best for you.

But don't be over-sold. Read the fine print about those allegedly-instant "approvals" -- whether online or off. Ask lenders what they mean by such terms as "pre-qualify" and "pre-approval" and when you get that letter which says how much you can borrow, look at the qualifications, reservations, and exceptions.

http://realtytimes.com/rtcpages/20010420_quickie.htm

[nikko]

No. When potential lenders review your ability to qualify you for a home loan, they are going to pay close attention to your debt-to-income ratio (DTI). To determine your DTI, start by computing your total net monthly income. This includes your monthly wages and any overtime, commissions or bonuses that are guaranteed; plus any pension monies or monies that come from alimony or child support, if applicable. If your income varies month-to-month, calculate your monthly average over the past two years. Don't forget to include any other monies earned, whether from rentals or any other additional income. To ensure that you will be willing to pay off the debt, lenders typically look at your credit history and credit score. Your credit score predicts how likely you are to repay the mortgage debt.

http://www.bills.com/mortgagearticle7/
http://www.homeloanlearningcenter.com/process/qualifyingforamortgage.html

[nikko]

Actually, you don't rebuild scores. You rebuild your credit history, which is then reflected by credit scores. The length of time to rebuild your credit history after a negative change depends on the reason behind the change. Most negative changes in scores are due to the addition of a negative element to your credit report such as a delinquency or collection account.. These new elements will continue to affect your scores until they reach a certain age. Delinquencies remain on your credit report for seven years. Most public record items remain on your credit report for seven years, although some bankruptcies may remain for 10 years and unpaid tax liens remain for 15 years. Inquiries remain on your report for two years.

Any change to the credit report could affect the individual’s scores. Simply closing two accounts not only lowers the number of open installment accounts (which generally will improve your score) but it also lowers the total number of all open accounts (which generally lowers your score). Furthermore, such an action will affect the average age of all accounts that could either raise or lower your score. As you can see, one seemingly simple change actually affects a large number of items on the credit report. Therefore, it is impossible to provide a completely accurate assessment of how one specific action will affect a person’s credit score. This is why the score factors are important. They identify what elements from your credit history are having the greatest impact so that you can take appropriate action.

http://www.experian.com/credit_score_basics/improve_credit_score.html

[nikko]

Applying for new credit is generally what hurts your score. Ordering a copy of your own credit report or credit score doesn't count. Those mass inquiries made by credit card lenders, who are trying to decide whether to send you an offer for a pre-approved card, also aren't going to hurt you, either -- unless you actually take them up on their offers.

If you want to minimize the damage from credit inquiries, make sure that when you shop for a mortgage you do so in a fairly short period of time. The FICO score treats multiple inquiries in a 45-day period as just one inquiry and ignores all inquiries made within 30 days prior to the day the score is computed.

http://articles.moneycentral.msn.com/Banking/YourCreditRating/4creditScoringMyths.aspx

[nikko]

When you co-sign a loan for someone you are making yourself liable for that loan. Here are a few things that I found that most people did not realize:

The co-signed loan is going to appear in your credit report
The co-signed loan will be considered as your debt by a new creditor. In other words, if the co-signed loan is for $400/month then this $400/month is going to be calculated in your ability to repay a new loan. The co-signed loan does and will effect your ability to obtain new credit for yourself.
If the person that you co-signed for makes a late payment, that will have an immediate effect on your credit score. This will impact your ability to obtain credit and that late payment will stay on your credit report for 7 years!
If the person defaults on the loan, the bank is going to come after you. When you co-sign a loan, you are equally responsible.
This is also a common problem with those who are seeking a divorce. If divorce is going to happen, make an all out effort to get all of your credit repositioned so that you have no "joint" debt. I have seen many a persons credit destroyed because of the financial struggles of an ex-spouse.
Bottom line....in my opinion it is a horrible idea to co-sign a loan.

http://blog.pacesettermortgage.com/2006/11/mortgages_and_c.html

[nikko]

We actually run into this type of scenario more often than you might think. Benevolent parents are willing to give what you accurately describe as a gift of equity when they sell a property within the family. With proper documentation, we treat this as a gift in the usual sense, just as if it were dollars being handed over, and the transaction would meet most loan program requirements.

Yes, the sale price in your example would be $200,000 for our purposes, and it will be important that the lender appraisal support this sale price as the property value. However, I would urge your parents to consult with their accountant on how best to structure the transaction for their purposes. They may be required to use the $200,000 in their tax reporting, yet I understand any tax is calculated on the consideration paid, so $150,000 could be the reportable sale price.

They might also want to file a gift tax return, depending on their accountant viewpoint. Under current federal tax law, you can gift up to $675,000 during your lifetime, so I believe no gift tax would be due. However, there might be a capital gains issue for them if they have not lived in the property two of the last five years. In any event, it is wise to consult with an accountant before finalizing the figures.

As to the mortgage, the lender would be concerned that this is a bonafide, arms-length transaction, with a true value and a true gift. In your example, the mortgage being requested is at 75% loan-to-value if an appraisal will support the $200,000 sale price. Generally, most conventional mortgage programs require a 20% down payment when it is all gifted; if less, in standard programs, the borrower would be required to bring 5% of his own money to the transaction. Your example more than fits the typical program requirements.

You would escape the need for any mortgage insurance and you would have a transaction with no money down. I certainly hope it works for you.

http://www.themortgagehouse.com/faqs.php?cat=19&id=118

[nikko]

No. The lender is being scammed, and if you go along with it you will be a participant in the scam.

The lender is being led to believe that he is getting a loan with a 5% down payment. The paperwork shows a price of $304K for the house, and a first mortgage loan of $289K, with $15K of equity provided by the buyer. But in truth there is no equity because the house is only worth $289K.

For this scam to work, the appraisal of the property must come in at $304K. This means that the appraiser is either hoodwinked by the fictitious sale price, or is a party to the scam.

And you will be a party to it as well. For the loan to close, you will be obliged to lie about the source of the funds used for the down payment.

Assuming the deception is not caught and the loan goes through, it might be caught in a post-closing audit, in which event the lender could elect to call the loan. All mortgage loans contain an "acceleration clause" which allows the lender to demand immediate repayment if any information provided by the borrower turns out to be false.

If your deception is not caught in a post-closing audit but sometime down the road you have difficulty making your mortgage payments, the same thing could happen. If they find you lied, you will get summary justice.

If your credit is good, you don't need to cheat in order to get 100% financing. It is available in the form of combination loans - 80% first mortgage and 20% second mortgage. It is also available as 100% first mortgage. You need a mortgage broker who is familiar with these options.

http://finance.yahoo.com/loan/mortgage/getting_the_loan/article/101528/Are_Seller_Contributions_Kosher

[nikko]

As its name implies, an adjustable rate mortgage (ARM) is one in which the rate changes (adjusts) on a specified schedule after an initial “fixed” period.
An ARM is considered riskier than a fixed rate mortgage because your payment may change significantly. In exchange for taking this risk, you are rewarded with an initial rate that is significantly below market rates for 30-Year Fixed Rate Mortgages. The more frequent the rate adjustments through the life of the loan, the lower the initial rate. Even after the loan adjusts, new rates will typically be below rates being offered to new borrowers for the 30-Year Fixed Rate program. Obviously, it’s best to have an ARM when interest rates are predicted to fall (not rise) because in periods of rising interest rates, it is possible that you will ultimately pay much more for an ARM than for a 30-Year Fixed Rate Mortgage.

Although somewhat riskier than a fixed rate mortgage, an ARM may benefit you if you have certain needs or find yourself in certain circumstances. In other circumstances, you may be better off with a fixed rate or other type of mortgage. Examine your financial and life situation with the help of your loan officer or financial advisor.

http://www.moving.com/Mortgage_and_Finance/MAI_Article/Adjustable_rate/

[nikko]

Paperwork involved in the mortgage application process is so extensive that you had better start gathering it a long time in advance. Full documentation will include:

‧ Federal tax returns from the previous two years.
‧ W-2 forms from the previous two years.
‧ A recent paycheck stub with your name and Social Security number, the name and address of your employer and your annual earnings on it
‧ You need to document your other sources of income, for example, income from a second job, overtime, commissions, bonuses, interest and dividend income, Social Security payments, VA and retirement benefits, alimony, child support.
‧ A list of your other debt obligations, such as credit cards, student loans, car loans, child support payments, including the minimum monthly payment and the balances.
‧ Investment records such as mutual fund statements, real estate and automobile titles, stock certificates and the like.
‧ Canceled checks that show your rent payments, or mortgage payments on your previous loan.

Recent years saw proliferation of more flexible documentation requirements that offer access to borrowing to people who for some reason cannot present papers verifying their income or assets or both. Lenders can waive disclosure or verification in return for a higher interest rate or larger down payments. For instance, self-employed borrowers cannot obtain documents disclosing their monthly income since it varies from month to month. A person who plans to move to a new city selling the house and quitting the job, can still qualify for the riskiest and most expensive no income/no assets plan where you do not need to disclose either your income or your assets.

http://www.financegates.com/education/banking/2004-11-18/mortgage_application_11182004.html

[nikko]

As you probably know, in a traditional joint back account, the bank considers both account signers to jointly own the account. In other words, even if you deposit all the money, your friend could clean out the account for her own benefit, without much risk of being prosecuted. And if you died, any balance remaining in the account would belong to your friend, not to your beneficiaries.

There is a new type of account that you should look into. It's called a "Limited Access Deposit Account" and not all banks offer it, so if yours doesn't, shop around for it. This account allows you and your friend to sign a declaration of intent with the bank which spells out what you've authorized your friend to do. She will need to keep accurate records of what she does, and if she misappropriates your money, she could be civilly or criminally prosecuted. The declaration clearly states that the account assets belong to you. There is no right of survivorship, so if you die, the assets would remain in your estate, and would not go to your friend. I need to warn you that limited access deposit accounts aren't a perfect answer. Even if you create a limited access deposit account, your bank is not required to monitor it any differently than it monitors other checking or savings accounts. So, you must continue to take practical steps to protect yourself: carefully read your bank statements every month, and immediately notify your bank if there are problems. A final caution - - NEVER put all your money into an account that someone else has access to. Just deposit enough funds to pay expenses for a few months, and transfer more money into the account when you need to. Good luck.

http://www.ago.state.ma.us/sp.cfm?pageid=1177