LESSON 14: WHAT LENDERS WILL ASK AND HOW THEIR UNDERWRITERS
WILL EVALUATE YOUR ANSWERS
There you sit, sweat dripping down your forehead.
Across the desk, the mortgage broker is chattering on about the
weather and last night's game. But all you can think about as he
slowly reaches into his desk drawer is the dreaded form that's sure
to emerge from its dank depths. You panic. Your heart races. You
wonder: "What could they possibly want to know?"
OK, so maybe applying for a loan isn't that dramatic.
But application time can be a nerve-racking experience for people
who don't know what to expect. We'll try to make life a little easier
by highlighting the major things lenders want to know and discussing
how the underwriters
(or computerized underwriting systems) that make loan decisions
evaluate those answers.
Here are the categories of information you'll
be asked to discuss and the types of questions lenders will pose to
elicit your information:
1) Employment and income: Where do you
work? How much do you make? How long have you been at your job?
How is your income derived -- is it a steady salary? Or are you
self-employed with irregular income? If it's the latter, a borrower
will need to provide extra documentation to win a favorable
2) Outstanding debts: What recurring debts
do you have? How much do you pay a month for auto loans? Credit
cards? How much of your monthly pretax income do these debts consume?
3) Loan purpose: Is this mortgage for a
home purchase or refinance? If it's a refinance, do you want to
take cash out at closing to pay off other debts? If so, how much?
4) Property use: Do you plan to live in
the house? Is it investment property (that is, are you going to
rent it out)?
5) Property type: Is it a single-family
home? A condominium? A duplex?
6) Cash reserves and assets: How much money
do you have in the bank? How much will be left after the down payment,
closing costs, etc.?
7) Down payment: How
much money are you putting down? Is this your own money? If not,
is it a gift from your parents? A non-profit agency grant?
(continued on next page)