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At your first meeting, a lender will ask a few basic questions about your finances to determine the level of mortgage for which you are qualified. The first determination is whether or not your gross income can support your mortgage payment. Then the lender will ask whether you have enough liquid assets to meet the upfront cash requirements for a down payment and closing costs. In some cases, a lender may require proof that you have enough assets that can be liquidated to make a few months of mortgage payments.
The first document you will need from a lender is a preapproval letter based on the verbal information you give to the lender. It is important to understand that a pre-approval letter does not legally obligate the lender to make the loan. An article in the Washington Post, "Some Pre-approvals Aren´t Worth the Ink They´re Printed On" (Washington Post, July 19, 2005, F1), described the conclusions of a national survey conducted by Campbell Communications, Inc. It read in part, "The agents said 39% of all preapprovals issued by Internet-based lenders are faulty or invalid." Other types of lenders also had problems with a percentage of their preapproval letters.
Therefore it is important to take the next step in which the lender verifies your employment, assets and liabilities before giving you a formal approval letter for a mortgage. It is essential that the data you provide to the lender is reviewed and approved by an underwriter. In a dynamic real estate market, like the one in Loudoun and Fairfax County, an approval letter is absolutely essential if you are attempting to make an offer on a property, the seller will usually not even consider offers that are not accompanied by a valid approval letter. In other words, your bargaining position in the negotiating process is greatly strengthened by the fact that the potential seller knows that a lender has already reviewed your finances and has determined that you qualify for the purchase of the residence.
No matter which type of lender you ultimately choose to deal with, you will need to supply a number of documents at the time you apply for a loan, including the following:
W-2 tax forms and Federal tax returns for the last two years. Employment history for the last two years.
Copy of your current month´s paycheck(s).
Copy of the contract of sale (including the legal description of the property).
Outstanding loans (including student loans), including addresses, account numbers, balances and monthly payments.
Information on real estate you own, including loan amounts, property addresses, loan balances and monthly payments.
Bank statements for all accounts for the last two months, including checking and savings.
Documents that demonstrate your vested interest in stocks, bonds or other investments.
Divorce decree, if you are paying and/or receiving alimony or child support.
For Veteran Administration (VA) loans only: DD214 forms and a Certificate of Eligibility.
A check for an appraisal and credit report.
This information is quite extensive. But as a loan applicant, you must keep in mind that the lender is making a major commitment to you and has the right to determine the safety of the mortgage loan.
The loan underwriter reviews your entire monthly costs for housing, including principal, interest, mortgage insurance, homeowners insurance and taxes on the property. Every property and every home buyer varies widely in terms of the purchasers qualifications and the home´s overall expenses, so it is not possible to create a specific profile that precisely shows what income is needed to pay for a home.
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Pat Paulas, Drew Paulas ans Associates, Realtors Loudoun County Real Estate and West Fairfax County Real Estate
Prudential PenFed's TeamWorks 11864 Sunrise Valley Drive • Reston, Virginia 20191 703.909.6333 e-mailtheTeam@eLoudounHomes.com
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