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How to prepare for a Lender's Credit Evaluation!
ESTABLISH CREDIT. Although a lender will not necessarily turn you down for not having credit, it is nice to see that the borrower has had previous experience with installment or revolving credit.
PAY YOUR RENT AND BILLS ON THE DUE DATE. Many people have the mistaken belief that the delinquency date is the date the bill is due and payable. Although payment before the delinquency date will prevent late charges and will not result in a late payment showing on your credit report, it doesn't leave you any margin for error. If you think it's due on the 15th and it's actually delinquent on the 16th, a days oversight is one day too many.
ALWAYS PAY AT LEAST THE MINIMUM PAYMENT. The lender/creditor does not care that every three months you make a substantial payment. Those two months in between result in a 30 days and 60 days overdue payment. A creditor would rather you make a minimum payment every month than for you to save and make a large payment every two months.
If you have numerous high interest accounts with high payments, consider a CONSOLIDATION LOAN through a lower interest credit union or lender. The lower your overall obligations the more loan you will be able to qualify for. Refinancing an auto loan to a lower payment would also be a consideration. A $450.00 a month car payment consumes a large portion of your expandable income. If home ownership is your PRIMARY GOAL consider trading in your BMW for a Ford Escort.
BUY DOWN YOUR INSTALLMENT DEBT TO SHORT TERM STATUS. The lender will consider an installment debt with less than 12 payments remaining to be short term debts and may not have to consider the payment in your debt ratio.
IF YOU HAVE CO-SIGNED ON A LOAN, have the primary borrower refinance and remove you from the obligation. Even if you, the cosigner, have never made a payment, you are liable and, in most situations, the lender will consider this as your obligation. If you don't have a good payment record, start now and MAKE EVERY EFFORT TO KEEP ALL YOUR PAYMENTS CURRENT FOR AT LEAST TWO YEARS. The most recent two years are going to be perceived as the most critical time to the lender.
Lastly, DON'T INCUR NEW DEBT. The temptation to purchase a new car, new appliances and new furniture can be very tempting. Don't let that temptation affect your debt to income ratios and put additional limitation on the amount of home mortgage for which you can qualify.
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Very Important !! |
The following is a general list of documents required by most financial institutions when applying for a loan:
Copy of W-2's for the last two years for all jobs, and copy of pay- stub (s) dated within 30 days.
Copies of checking, savings or other account statements for the past three months.
For FHA loans only, copy of driver's license (or photo ID) and a copy of your Social Security card.
Bankruptcy discharge.
If you have been a tenant within the last two years, provide the name (s) and address (es) of your landlord (s).
If you own real estate, please complete the "Real Estate Owned" section of the loan application. They will need the name (s), address (es) and account number (s) for the lien holder (s) on each property. If any properties are owned free and clear, please provide proof of such (i.e., copy of Title Policy or copy of the Homeowner's insurance policy to show no lien holder.
If you own rental property, provide copy of the rental/lease agreement (s) and copies of your Federal Income Tax returns for the past two years (all pages).
If you have any income other than wages, please provide a copy of your Federal Income Tax returns for the last two years (all pages).
If you have any 401(k). IRA's, stocks, annuities and so forth, please provide statements/documents.
If self Employed, please provide last two years of tax returns, Profit/Loss statement and Balance Sheet.
If you receive fix income (such as retirement/income/social security), please provide copy of your three months of most recent bank statements showing automatic deposits of the same. Also, provide copies of two years of 1099's, and a copy of the Award Letter.
If you have been previously married and (or) are obligated to pay (or received) alimony or child support, please provide a copy of your final divorce decree. If you receive child support or alimony, and are wishing to use these monies as income to qualify for your loan, please provide six months of cancelled checks or printout from the State to show receipt of monies.
If your are receiving gift funds, you and the donor will need to sign a Gift Letter. The relationship of the donor must be documented. In some cases they will need to document that the donor has the ability to gift the funds.
If you have credit cards, student loans, credit line loans, or any other debt, please provide account numbers and balances.
Loan Types
The following are some of the most common loan types available.
For more information and for other programs available, please contact your local Lender
FIX RATE. Loans with a fix interest rate for the life of the loan, 15/20/30 year programs.
ADJUSTABLE RATE (ARM). Loans with an interest rate that will fluctuate (will go up or down) depending on the financial index your Lender is using.There is a cap as to how much your Lender can increase that rate and how often.
CONVERTIBLE ARM. It's a combination of an ARM with a fix rate after a predetermined number of years.
FHA. Loans offer to lower-income individuals.
VA. Loans for Veterans, There is a limit on the amount they can borrow.
Phone: (208) 921-0970
Fax: (208) 855-9650
Referral Network:
Dinorah Thurber