Posts Tagged ‘Mortgage 101’

Documenting Assets is Important

Mortgage lenders have tightened up on underwriting criteria since the subprime fallout. One area that is increasingly looked at is the documentation of assets.

Asstes play a key role in qualifying for a mortgage loan. In many cases having assets may help a home buyer get approved when job time or income is less than desired. And while horrible credit is hard to overcome, tremendous assets can also help overcome some credit chellenges.

Assets can be used for paying towards money down or closing costs on your mortgage. They can also be used to provide mortgage “reserves.” Reserves of cash make a lender feel more comfortable should you run into a tight spot financially. With a reserve cushion, you would still have funds to make your mortgage payment, possibly for a few months!

Assets must be “liquid”. In other words, you must have access to get your hands on the funds. Certain retirement plans (like pension plans) do not allow any withdrawls at all, and therefore can not be considered assets. Other property owned, regardless of the amount of equity available, would not be considered assets. (Until you sell the property there is no guarantee as to how much money you would have, and taking a loan out against the property creates another liability.)

So for a mortgage application, acceptable assets would be items like savings accounts, checking accounts, money market accounts, stock shares, 401k and IRA accounts… any account that can be easily liquidated. For certain accounts such as 401k and IRA accounts, you may need to document the terms in which you can get the funds as well as the funds available.

Do you have money spread accross 4 different accounts? You may be tempted to consolidate them all to one account to make things “easier”… don’t do it! Leave the money in the accounts as they are. Any time accounts are opened, closed or money is transferred, it can become a headache having to not only document the accounts but also the source of all the deposits, withdrawls and transfers.

You may ask, why does this all matter? After all, it’s your money, right? It may well be your money, but from an underwriter’s viewpoint they need to be sure there are no unusual deposits that can not be documented. Their fear is that a borrower may have gone out and borrowed the $5,000 deposit that can not be documented creating another monthly payment not showing on credit yet.

So when you are applying for a mortgage loan in Charlotte (or anywhere!) be sure to provide every source of money you have saved. But don’t try to consolidate them into one particular account. It is easier for a processor to verify 5 accounts than to try and document 5 accounts plus 15 deposits and withdrawls.

What is a Pre-Approval?

The term “pre-approval” has taken on many different meanings depending on who you talk to. Too many people confuse a pre-qualification with a pre-approval, but they are not the same. A pre-qualification is a very general and very simple opinion as to what mortgage you may qualify for. However, the basis of a pre-qualification is all discussion and nothing is really explored.

A mortgage pre-approval is much more than that. When you go through the pre-approval process, it is more in depth and usually takes a bit more time. In most cases, a lender will discuss your needs and goals, obtain information related to your employment history, credit history, banking history and any other information needed to help determine the pre-approval. Some documentation such as pay stubs, bank account statements, tax returns, ect may be required as well. Read the rest of this entry »

What is a Pre-Qualification?

Simply put, a pre-qualification is an initial assesment of one’s ability to qualify for a mortgage loan. In it’s purest form, getting pre-qualified means that you have submitted enough general information to a lender that would allow a lender to offer an opinion as to your ability to get approved for a mortgage. This is not an actual approval nor the same thing as a pre-approval.

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The Mortgage Process

  Our Mission: We are dedicated to educating, inspiring and assisting in the American Dream.

As part of our mission to Educate, I wanted to begin a series on the mortgage process. While this series will focus on the basics of the mortgage process in general, it will be tailored to fit the way the Carolina Mortgage Connection does business in Charlotte.

With our dedication to the Charlotte Home Mortgage market, we really want to ensure that home buyers and home owners in the Charlotte area have a solid resource they can trust. One that will provide them honest answers to what really happens in the mortgage industry.

This series is designed to provide the average person a basic working knowledge of the mortgage process, inclusing the hows, whats and whys. It will not be a shameless plug of my services; however if there is a certain area in which our team does things differently it will be highlighted. And at the end of each article, we will give you the opportunity to get involved, either by commenting or putting your newfound knowledge to work by getting approved for a more a mortgage with us.

I hope that this series is beneficial for all who read it. If there are suggestions or comments, please feel free to contact us with your feedback!

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Sincerely,

Ed Nailor