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BUYERS |
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| To obtain a mortgage, buyers must consider certain aspects of their credit history: | ||
| 1. Credit score - A Credit Score is a numerical value used by lenders to rate individuals according to their most probable ability to repay a debt such as a mortgage. The score measures the relative degree of risk a potential borrower represents to the lender or investor. The most widely used system of credit scoring used in the United States is the Fair Isaac Credit Rating Score (FICO). 2. Income - Income must be verifiable. That is - there must be a paper trail from income to deposit. - There must be enough cash to cover the down payment, closing costs ant two months reserves of the mortgage amount. - the buyer must have a 2 year job history in the same line of work - the buyer must present pay stubs or W2 forms to verify income. If self employed two years of tax returns are required. Overtime, bonuses and part-time salaries may be averaged over a two year period. 3. Debts - The six most important debts to be considered are (1) active loans or mortgages, (2) credit cards, (3) automobile loans, (4) alimony or child support, (5) student loans, (6) liens or judgments.
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| A buyer may be assisted in obtaining mortgage settlement expenses by: | ||
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1. Gifts 2. Grants 3. Designed mortgage programs |
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| Mortgage Letters | ||
| There are several levels of acknowledgement (called letters) given to buyers by lenders. The intent of these letters is to give notice to others that the buyer is actively seeking a mortgage. The process of actively seeking a mortgage is not complete until a mortgage approval letter - with completion of all conditions - is received. | ||
| 1. Prequalification letter - means the lender has talked to the borrower over the phone or has received an initial communication of intent to borrow. The lender has asked a few basic questions but has no factual evidence to justify the giving of a loan. No formal written application for a mortgage has been made. | ||
| 2. Preapproval letter - means the lender has received some basic factual information such as credit history, credit score, job income. The lender may or may not have - at this point - actually met with the borrower to allow the borrower to make a formal application for the loan. | ||
| 3. Approval letter - - this letter acknowledges that all of the lender's loan requirements have been met and most have been verified by the appropriate documentation. Yet some of the items may have been discussed but the factual information has not yet been received. Requested information that has not been actually received is outlined in separate paragraphs of the approval letter under the title "conditions". | ||
| The most important document a buyer can present to a seller or a seller's agent as evidence of his ability to buy is a mortgage approval letter. | ||
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Mortgage Approval letter - this letter acknowledges that all of the lender's loan requirements have been met and verified by the appropriate documentation. |
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Underwriting - Even after completion of the requirements for a mortgage approval letter another important step remains. This step is called "Underwriting". |
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| - Underwriting is the process a lender uses to determine if the risk of lending to a particular borrower under certain parameters is acceptable. | ||
| - Underwriting requires that the documentation received by the lender be reviewed for accuracy and completeness of those requirements necessary for the Federal Government or a private lender to agree to release funds to the bank or mortgage company. | ||
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An evaluation of a person's credit
worthiness includes: 1. Past 7 years credit history 2. Bankruptcy must have been settled more than one year past and a letter of satisfaction must be available. 3. A veteran must have an entitlement letter 4. No co-signature on other loans 5. Rent must have been paid on time 6. No defaulted student loans 7. The amount of child support or alimony paid 8. Other sources of funds |
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Affiliates of Coldwell Banker Residential Brokerage , Owings Mills - 410-363-0700 |
