Issues for qualifying are:
- Employment history
- Cash available for closing and the source of those funds
- Credit history
Verification of Income
With our new process we try to eliminate paper work not create it! Documentation generally needed include the following:
- A current pay stub from borrower’s employer.
- W2’s from the borrower’s employer—most recent two years.
- Written verification of employment from the employer (lenders request this information directly from employer).
Verification of Funds to Close
Cash and cash equivalents, such as stocks and bonds, as well as equity ownership in other assets, such as real estate. Some or all of these assets may be used for the down payment and for paying the loan closing costs. These assests will need to be validated before the final credit decision can be rendered. There are several ways this can be done:
- Borrowers may provide a copy or the last 3 months of bank depository or investment company statements.
- Written verification of deposit from the depository institution. This information would be transmitted directly to the institution(s).
- For a purchase, a copy of the sales contract on any real estate to be sold.
Some or all of the above may be needed in order to verify the funds to close.
If you are refinancing you will need enough reserves to pay your mortgage, insurance and taxes for approximately 3 months.
Credit reporting agencies have access to central repositories that collect, store and report credit obligations and pay records on most consumers. Have any collections, judgements, liens, repossessions or foreclosures been reported? These items are all covered in a full report. The report will assist us in getting you the best loan.
Property Value Confirmation
The security or collateral for residential mortgages is real property. Appraisals use three approaches in the evaluation analysis.
The evaluation approaches are:
- Cost Approach: The value of the land plus the cost of the improvements less depreciation.
- The Market Approach: Recent sales in your neighborhood.
- Income Approach: Determines the value based on the rental income that can be derived from the property.
Although all three approaches are considered in an appraisal report, the market value approach is usually given the most weight because it reviews the most recent sales surrounding the property.
Most appraisals begin with a physical inspection of the property by a professional appraiser. During the inspection, the appraiser measures the property, locates the rooms on a drawing, and notes the overall condition of the property and surrounding neighborhood.
After the inspection, the appraiser locates both the sales activity and current listings in the area from real estate data bases and prepares a written report. The report indicates the value of the property and summarizes the important aspects of the evaluation process.
During the loan processing, lenders require that a title search be performed on the property. This search will reveal the legal description, the owner of record and outstanding liens and encumbrance on the property. Liens are items such as property taxes, mortgage loans, and judgments. Encumbrances may be road maintenance agreements, right of way and utility easements.
Usually, a plot map or land survey is prepared as part of the title search to show the location of the improvement on the property. After the search has been completed, the title company will prepare a written document that reflects their findings and delivers the report to the lender. This report is commonly called a preliminary title report.
After the loan is closed, the title company will prepare a title policy that reflects the new mortgage loan as a lien on the property. The policy is called an American Land Title Association (ALTA) policy. Additionally, IF there was a transfer of title, the new owner usually obtains a title policy as well.