What Lenders Want to Know

What Lenders Want to Know

If You Want to Get Your Loan Approved, Be Ready With Answers

You can speed up the loan application process by having the right information with you when you meet with your mortgage lender. Here – from the Federal National Mortgage Association, the government-chartered company otherwise known as Fannie Mae that buys mortgages from 3,000 lenders nationwide – are some of the things lenders look for.

Purchase agreement/Sales Contract:

Outlines terms and conditions of the sale.

Your addresses: All from last seven years.

Employment information: Name, address, and phone number of all employers for the past seven years.

Lenders want to know everything! Photograph: Megan Jorgensen (Elena)

Sources of income: Two recent pay stubs and your W-2 form for the previous two years. Verification of income from social security pension, interest or dividends, rental income, child support, and alimony may also be needed.

Current Assets: Balance, account number, name and address of financial institutions for your savings, checking and investment accounts. Recent statements should suffice. Real estate and personal property can also be listed on your application as assets. Bring an estimate of market value.

Current debts: Names and addresses of all creditors plus account numbers, current balances, monthly payments. Recent bank statements may be required.

Source of down payment: May be savings, stocks, investments, sales of other property or life insurance policies. May be from relatives if it doesn’t have to be repaid.

Follow the Bouncing Rate

What to look for in adjustable rate mortgage

As interest rates dropped in the early 1990s, the race to ARMs (Adjustable Rate Mortgages) slowed dramatically. But, in 1994, interest rates started rising again, and so did ARM applications, accounting for some 40 percent of all mortgages.

Lenders use indexes – such as the rate on six-month Treasury bills or three-year Treasury notes – to decide when to raise or lower the interest rate on an adjustable rate mortgage. For example, when the financial index your lender uses rises, the interest rate on your mortgage may also increase – it depends on how the index is applied. Fluctuations in the interest rate can change your monthly payments, mortgage length, or principal balance. Some indexes reflect what the market will bear across the country; others reflect local trends. Other money indexes are controlled solely by individual lenders. The index you select should be one that is verified easily.

Its past performance may give you an indication of how stable it is. Have someone with expertise translate past and potential changes into dollars and cents. Also, find out how the index is used. For example, if the index changes monthly, is the lender also changing the rate on your loan monthly, or are there limits on the number of times and/or amount your rate can fluctuate? Finally, check how much advance warning the lender will give you before new rates or payments go into effect.