Mortgage Basics
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mortgage
Questions to expect from mortgage lenders

Your mortgage lender will want to know a lot about you before approving your loan application, and justifiably so; it and its underwriters want to be assured that you meet their minimum level of creditworthiness before lending you money.

Here are the general areas of questioning you can expect from a lender:

Employment and income

1. Where do you work?
2. How much do you make?
3. How long have you been at your job?
4. How is your income derived -- steady salary or irregular income?
5. If it's the latter, you may need to provide more details to obtain a favorable interest rate.

Outstanding debts

1. What recurring debts do you have?
2. How much do you pay a month for auto loans?
3. Credit cards?
4. How much of your monthly pretax income do these debts consume?

Cash reserves and assets

1. How much money do you have in the bank?
2. How much will be left after you pay your down payment and closing costs?

Down payment

1. How much money are you putting down?
2. Is this your own money?
3. If not, is it a gift from your parents?
4. A nonprofit agency grant?

Loan purpose

1. Is this mortgage for a home buy or refinance?
2. If it's a refinance, do you want to take cash out at closing to pay off other debts?
3. If so, how much?

Property use

1. Do you plan to live in the house?
2. Is it investment property?

Property type

1. A condominium?
2. A duplex?

The following responses tend to work in your favor:

  • Steady employment (two or more years) with the same employer or in same line of work.
  • Low debt: no recent major buys (such as automobiles) and a debt-to-income ratio of 36 percent or less.
  • Loan is for straight home purchase (or rate-and-term refinance).
  • Property is detached single-family home to be used as primary residence.
  • Down payment of at least 5 percent of sales price with your own money.
  • You'll have at least two months' worth of mortgage payments in the bank after closing.

These responses tend to work against you:

  • Self-employed or contract worker.
  • High debt: credit cards maxed out, total debt-to-income ratio more than 36 percent.
  • Property is a duplex or condominium, to be used as a vacation home or rental.
  • No cash left after home buy and closing costs.
  • Down payment is 3 percent or less of buy price and money is borrowed.
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