What is the most important part of a mortgage loan application?

The declarations page is the most important part of a loan application! 

Why you ask?
Because it opens up a conversation about some of the major red flags and problems a Mortgage loan can run into. By going over the declarations page of the application with the applicant you can address and alleviate many of the pitfalls later in the process.
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Remember there are 2 families depending on you and your pre -qualification letter
  1. Buyer (family)
  2. Seller (seller)

The worst thing in the world is to get a home under contract only to find out later that the client no longer qualifies for the home.

Here are the most important questions and my thoughts on them.
  1. Are there any outstanding judgements against you?
    1. Great question, sometimes liens don’t show up on credit reports but could show up in title later in the transaction
  2. Have you had a bankruptcy in last 7 years?
    1. Once again sometimes bankruptcies wont show on credit report but will come up in processing when we do our back ground checks.
  3. Have you had a foreclosure or short sale in last 7 years?
    1. Every mtg company runs 3rd party reports that check on this- finding this out late in the process is bad for the seller and the buyer
  4. Are you party to a lawsuit?
    1. If the borrower is being sued they may or may not qualify for a mortgage until the suit has been decided.
  5. Do you have to pay child support or Alimony?
    1. Most borrowers don’t think this matters, but trust me it does, and we have to count that payment into the qualify ratios. Asking up front negates problems later in the process
  6. Is any part of the down payment borrowed?
    1. Unlike buying a car, mortgage companies do care where your downpayment comes from. Down payment must come from the following
      1. Borrowers own (seasoned) funds
      2. Gift
      3. Secured Loan
      4. Approved DPA program
    2. Downpayment can not come from the following (just to name a few)
      1. Unsecured loan
      2. Credit card advance
  7. Are you a cosigner on a note for anyone?
    1. Depending on how that is structured you may or may not have to count against borrowers debt ratio. Better to find out early on in the process so you can make that determination.
  8. Are you a US citizen?
    1. Most programs require you to be a citizen, permanent resident, or have a valid work visa. Better to find out early in the process.
  9. Is this going to be a primary residence?
    1. Downpayment (DP) requirements and UW guidelines are much less strict on a primary residence compared to a 2nd home or investment home.
      1. Investment and 2nd home financing can be complicated and require extra documentation, reserves, and downpayment.
  10. Have you had ownership in a property in the last 3 years?
    1. 1st time homes buyer is defined as someone who has not owned a home in the last 3 years.
      1. There are many DPA assistance programs and low DP programs that require this to qualify.
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As you can see….knowing ALL of the questions can help you better qualify your client for a mortgage loan and reduce unwanted problems later in the process. Remember it’s not just your clients family depending on the strength of the pre- qualification letter it is also the seller (another family)depending on you.
John E McClellan
Regional Manager
Supreme Lending – Austin -San Antonio – Houston
3420 Executive Center Dr. #300
Austin, TX 78731
512-279-1150 Office
512-589-8088 Cell
NMLS #207768

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