WHAT DO I NEED TO GET A LOAN?

How to review your finances and get ready for the loan process

Examine Your Finances

Shopping for a mortgage can be a intimidating task, especially if you are not prepared, so this section will help you get ready for the loan process. Preparing a budget is a good way to start, it will help the lender know whether you have enough money for a down payment, closing costs, monthly mortgage payment, taxes, insurance, and other costs associated with buying a home. Determine how your mortgage payment will fit your current budget and give plenty of thought to your future obligations 15 to 30 years down the road. Lenders use guidelines to determine whether prospective home buyers will be able to make their monthly mortgage payments comfortably.

Review your income and expenses, both current and projected to determine what you can comfortably manage each month. Don't forget related insurance, taxes, homeowner association dues and any other costs rolled into the mortgage payment, as well as your mortgage payment.

Don't make the mistake of going for a mortgage that you can't afford, you'll face the possibility of losing the roof over your head, as well as damaging your ability to purchase a home later.

Review Your Credit Record

Having a good credit record basically means that you pay your rent and other bills on time. However, having less than perfect credit doesn't mean you can't get a mortgage loan. Understanding credit before you meet with your lender/broker can make the total loan process easier.

Credit Reports	Credit History
You can order a copy of your credit report (a nominal fee may apply) via telephone at: • Equifax: 1-800-685-1111 • Trans Union: 1-800-888-4213 • Experian: 1-888-397-3742	A record of an individual's open and fully repaid debts. A credit history helps a lender determine whether a potential borrower has a history of repaying debts in a timely manner.

Credit bureaus gather information from credit card companies, banks, department stores, and other firms to compile a credit record of your debts and how you have repaid them.
Your credit history shows how well you have paid your debts in the past.
Capacity is your financial means for repaying your debt.
Capital indicates whether you have enough money for a down payment and closing costs.
Collateral serves to protect the lender if you fail to repay the loan.

Your lender will request a credit report as part of the mortgage loan process, so it's advisable to review your report before you meet with your lender. If there are discrepancies or errors in your credit report, you should contact the credit bureau to correct them.

What is required to Pre-Qualify?

Pre-qualify for a Loan

Pre-qualification is a good first step in the home-buying process, it occurs before the loan process actually begins. You provide information to the lender about your income and debts, who in turn makes a financial determination about how much house you may be able to afford. Different loan programs may lead to different values, depending on whether you are qualified for them, so be sure to get a pre-qualification for each type of program you are suited for.

Advantages of pre-qualifying

Knowing how much you can afford will help you focus on your house hunting.
Being pre-qualified can demonstrate to a seller that you're a serious buyer, not just shopping.
Completing the final mortgage application will go faster since you've already provided much of your information.

What you typically need to pre-qualify

You can save time in the pre-qualification process by preparing some information before you get started:

Type of home and approximate price
Type of loan you want
The amount of down payment you plan to make
Personal information (name, phone number, address, date of birth)
Employment history
Social Security number
Financial information (monthly income, current debts, assets)

What is required to be Pre-Approved?

Pre-approval is much more in-depth and highly recommended early in the home buying process. Typically your pre-approval is submitted along with any bid you make on a property, if another buyer bids on the same property with a pre-qualification, your pre-approval will demonstrate to the seller that you are a much more qualified buyer. Always ask a lender if they offer a program that will allow you to send and clear (verify income and assets) your pre-approved loan conditions and offers you a protection option for your rate during the home search process.

What you typically need for pre-approval

You can save time in the pre-approval process by preparing some information before you get started:

Type of home and approximate price
Type of loan you want
The amount of down payment you plan to make
Personal information (name, phone number, address, date of birth)
Employment history - Names, addresses and telephone numbers of all your employers for the last two years.
W-2s for the two most recent years. You may also provide other income information, such as social security, pension, interest or dividends, rental income, and child support or alimony, if you choose to have them considered. Self-employment income may also be considered.
Pay stubs. Provide your pay stubs that cover the 30-day period before the date of your mortgage application.
Federal income tax returns. If you are self-employed, or more than 25% of your income comes from commission, overtime or bonuses, you may need to provide complete copies of federal income tax returns you filed for the two most recent years.
Social Security number
Current debts. You'll need to provide the account numbers, current balances and the minimum monthly payments of all credit accounts, such as loans, credit cards, child support and other payments you make each month.
Financial assets
Bank statements. You may need to provide statements from all your accounts (checking, savings, mutual funds, money markets, certificates of deposits, 401(k) or other retirement accounts) for the last two months to verify the exact amount of cash you have available for your down payment and other costs associated with your home purchase.

Gather the facts and go shopping

Start calling for rate quotes, or go online. When calling for a specific rate quote from different mortgage providers, it is very important to ask for a rate quote disclosing the following items:

1. Your sales price and the amount of the loan you want.
2. When you are closing.
3. The program (type of loan) you are seeking (i.e. Conventional, FHA, VA, Jumbo, Sub Prime, Stated Income, etc.)
4. Term of loan you are looking for (i.e. 30 year fixed, 15 year fixed, 7 year adjustable rate mortgage, etc.). For every rate quote you receive from a different mortgage provider, get a good faith estimate either faxed or emailed to you. Please note when you receive a rate quote from a specific mortgage provider, that rate could expire at any time. If you can not have a good faith estimate faxed or emailed to you, ask the mortgage provider to go over all of their lenders fees. If they are a mortgage broker, ask what their broker fee is.

Review the How do I choose the best loan and How do I select a Mortgage company sections, compile all the rates and fees and compare. Determine which mortgage provider has given the best overall deal. Now take the list of mortgage providers and compare the considerations for the best service and best deal.