A borrower’s guide to the mortgage application

Section 3: Borrower Information. This section asks for the borrower’s and co-borrower’s full names, birth dates, addresses, telephone numbers, Social Security numbers, marital status and other details. All of it, Cook says, should be “a no-brainer” for borrowers.

Section 4: Employment Information. This section enables the lender to contact the borrower’s employer (or employers) to verify the length and terms of employment.

A two-year job history typically is a minimum requirement, according to Jay Dacey, a mortgage broker at Metropolitan Financial Mortgage Co. in Minneapolis. That means specificity is crucial. “If you get lazy and two years was really one year and 10 months, then all of a sudden the whole loan could be messed up,” he warns.

Section 5: Monthly Income and Combined Housing Expense Information. The left side of this section is used to determine whether the borrower has the financial ability to repay the mortgage. Cook says this information often “requires some tweaking” because lenders calculate income differently than most borrowers perceive it.

Virtually all lenders require you to sign Internal Revenue Service Form 4506-T, which authorizes the lender to request a transcript of your tax returns.

One potential glitch for self-employed borrowers early in the year is that last year’s earnings can’t be used for loan qualification purposes until the lender can obtain verification of a current tax return from the IRS, Dacey explains. It takes four to six weeks for the IRS to process and verify a Form 4506-T.

The right side of this section discloses the so-called payment shock the borrower will experience as he or she transitions to new, often higher monthly housing costs.

“If someone has been living with Mom and Dad, paying zero rent, and is taking on a $1,500 payment and hasn’t been able to save any money, that’s a signal to the lender to look closer,” Cook says. “If they’re paying $1,200 in rent and the new house payment is $1,400 and they have a down payment and good credit scores, the lender is not so worried.”

Article source: http://www.bankrate.com/finance/mortgages/mortgage-application-borrowers-guide.aspx

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