What do I need to start?
Cynthia E. Brodrick

Preparation is key. Getting the money will be much easier if you've gotten your act together ahead of time.

Know your credit history

If you have any concerns about your credit, you can check your own credit reports ahead of time to see if you can clear any mistakes or problems. Credit reports only cost $8 from each of the three credit reporting companies. You can get a copy for free if you've been turned down recently for a loan. The three major credit reporting agencies are Equifax, Experian and TransUnion.

Even if you're credit is not stellar, you can probably still get a house, although you may have to spend more for a mortgage. "Even with credit that's messed up, you can still get a house. If you want to buy a house, you'll have to pay for it," explains Doug Anderson, president of Cornerstone Mortgage in Denver and chair of communication for the National Association of Mortgage Brokers.

Know how much money you want to borrow

Once you're certain that you are a good or even adequate credit risk for borrowing huge sums of money, figure out how much you'll need. You'll need a realistic idea of how much of a down payment you can afford. Be sure to hold out enough cash for closing costs when calculating this figure. Also, consider how large a monthly mortgage payment (including insurance and taxes) you can afford. Anderson says, "You don't want your total debt [house payments and payments on other obligations] to be more than 40 percent of your income."

A mortgage banker or broker can help you with these figures. Anderson says, "We'll look at your income and debt and calculate how much you can afford."

Or you can work out how much house you can afford with this online calculator. Once you have an idea of how much house you can afford, you can then figure out how much you'll need to borrow.

Gather your financial documents

The lender will want to see evidence of your income, assets and liabilities. You can know exactly what documents and information you need by calling the lender and getting pre-qualified, suggests Chuck Dahlgren, head of residential production for Wachovia Bank in Winston-Salem, N.C. Paperwork requirements can change from customer to customer depending on credit problems and other variables. Dahlgren adds, "With a lot of the electric underwriting available, a lot of the documentation that was standard is no longer required."

If you've been keeping good files, gathering what you need won't take long. If not, you'll be spending a lot of time on search and rescue. Typically you'll need the following documents:

• Recent pay stubs showing your income for the past month or so

• Account information (think mutual funds and stockbroker accounts, as well as checking and savings accounts)

• Information on long-term debts, such as credit cards, auto loans, installment loans, child support, etc.

• The last two years' federal tax returns and last two years' W-2s

• Other paperwork if applicable to you: proof of a deferred student loan, the front page of your current homeowners insurance, a copy of a Social Security awards letter

"Be smart about the information you give," adds Anderson. Even if an NSF or insufficient funds note in your checking account is the first in a lifetime, you might want to consider waiting a month so the lender doesn't have to see it. Remember to bring verification of these items for everyone involved in the loan.

-- Posted: Aug. 26, 1999