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CHAPTER VII -- REALITY CHECK

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 interest rate.

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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? See Tips

(continued on next page)

 

TABLE OF CONTENTS

CHAPTER I
  Lesson 1
  Quiz

CHAPTER II
  Lesson 2
  Quiz

CHAPTER III
  Lesson 3
  Lesson 4
  Lesson 5
  Quiz

CHAPTER IV
  Lesson 6
  Lesson 7
  Quiz

CHAPTER V
  Lesson 8
  Lesson 9
  Quiz

CHAPTER VI
  Lesson 10
  Lesson 11
  Quiz

CHAPTER VII
  Lesson 12
  Lesson 13
  Lesson 14
  Quiz

CHAPTER VIII
  Lesson 15
  Lesson 16
  Lesson 17
  Lesson 18
  Quiz

CHAPTER IX
  Lesson 19
  Quiz

CHAPTER X
  Lesson 20
  Quiz

CHAPTER XI
  Lesson 21
  Quiz

CHAPTER XII
  Lesson 22
  Lesson 23
  Lesson 24
  Quiz

CHAPTER XIII
  Lesson 25
  Lesson 26
  Lesson 27
  Quiz

CHAPTER XIV
  Lesson 28
  Lesson 29
  Lesson 30
  Quiz

Definitions





RELATED STORIES

Should I save cash or pay off debt before I buy a home?

The lowdown on mortgages that require little cash up front

What the lenders look for -- and how you can use that information

Taking advantage of automated underwriting

 
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