Mortgage Application Tips – Part I

The days of just breathing will get you a loan approval are thankfully long-gone and hopefully never coming back. Obviously after taking billions of dollars in losses lenders have tightened up their mortgage underwriting guidelines making what you put on your mortgage application even more important. It goes without saying that every item on your mortgage application must be true and accurate. If you lie on your mortgage application – one it will get denied and two you may be subject to criminal prosecution for mortgage fraud.

Before you even get started on your mortgage application make sure that your credit score is lendable. For FHA loans that means that you must have a minimum FICO Score of 620. For a Conventional loan with an LTV greater than 80%  you will need a score of at least 660-680.  If the loan to value on a Conventional Loan is less than 80% you will need a minimum of a 620 FICO Score. For Jumbo Loans the majority of lenders want a minimum of 700-720 while a few will go lower and some depending on the loan amount will want it to be higher.

You will need to supply the lender with a verifiable two year residency history or where have you lived for the last two years. They will check the mortgage and deed records if you say you are a homeowner and will verify your rental history if you have been renting. make sure that the mortgage or rental payment on the address is the same as what will be verified with the mortgage-holder or landlord.

Employment history – lenders will check a minimum of the last two years of your job history. Make sure that you put accurate phone numbers on the application for the lender to verify your current and/or previous employment. Make sure you accurately list and separate out your base income from any commission or bonus income that you receive. To count bonus or commission income on your mortgage application you must have been earning it for at least two years. In addition, your employer must state that they expect the bonuses and commissions to continue into the future.

If you are self-employed lenders will require that you have been so for a minimum of two years. The most important thing to remember is that for qualifying purposes the lender will be using your Adjusted Gross Income and not the gross income of the business. They are going to use the AGI that you report to the IRS as the income on your mortgage application. Also when self-employed make sure that you file both your business tax returns and personal tax returns on-time. The lender will check with the IRS to make sure the tax returns you submit to them with your mortgage application have been filed and match exactly with the ones you gave them.

Will continue with our mortgage application tips series and address other key items with regard to completing a mortgage application. Until next time…

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