When completing your loan application it may be intimidating and almost feel like an interview. Come prepared by knowing the answers to these ten questions that your lender will ask you.
- Where’s your proof of income?
Be prepared by showing proof of two years’ worth of income at the ready. Have pay stubs, copies of checks, paid independent contractor invoices, and other documents that verify your employment. Be sure to disclose any other sources of income, such as alimony or child support.
- What are your assets?
Your mortgage lender wants to know about any cash reserves that you have. A balanced investment portfolio shows your investment planning and goals are not entirely focused on home value appreciation. They also want to see that you can be tapped in an emergency in case you need money for your mortgage payment.
- What are your outstanding debts?
The more debt you have the less likely you are to receive a mortgage; more debt also means a higher interest rate on the money you borrow. The debt-to-income ratio on mortgages is 43%. The debt-to-income ratio measures how much of your gross (before taxes) income is used to pay housing costs, including principal, interest, taxes, insurance, mortgage insurance (if applicable), and homeowners association fees (if applicable). Other sources of debt, such as credit cards, student loans, and car loans will affect your debt-to-income ratio.
- What’s your credit score?
You should already know your credit score because you have recently pulled your credit report and reviewed it. Before meeting with your lender, we suggest that you get your credit score in the best shape possible. You can do this by paying off any debt or disputing discrepancies.
- Now that you are about to close, how’s your credit again?
Your lender will check to ensure that you have not impaired your credit score or you debt-to-income ratio. Your credit score will be pulled, yet again, to make sure you have not opened a new credit card or added new debt. From the moment your credit score is pulled for the first time, do not take on anymore debt.
- How much do you have for a down payment?
The larger the down payment, the more likely you will convince your lender you take owning a home seriously and will not walk away if things get tough. Your down payment will determine if you qualify for a mortgage, how much your lender will give you, and what interest rate you will receive.
- How will you use this property?
If you are buying this as an investment property, let your lender know up front. In order to get the right loan, your lender needs to know how you plan on using the property you are purchasing.
- Are you involved in a lawsuit?
A lawsuit involving a financial judgment could affect your financial position. If you are in a similar case, you will have to prove why the judgment will not harm you financially.
- What are the details of your divorce?
If you are recently divorced, expect your lender to ask questions about it. The lender does not need the details about what led to the divorce, just how it affected you financially.
- What is your ethnic background?
This question isn’t discriminatory; this is in place for federal oversight, so the the government can crack down on discriminatory lenders.
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