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Personal Finance And Mortgages

If you are planning to apply for a mortgage in the near future, it may pay to be prepared.  Lenders will want to dig into your financial life, and you must be prepared to present them with the paperwork that they require.  If you wait until the last minute, it could hold up your approval process, and that dream home may slip away!

Be prepared by having the following documentation ready BEFORE you ever apply for the loan.  (And watch your loan officer smile!)

Employment Information

Some borrowers will have to provide more than just a W-2 from their employers.  If you fall under one of the following categories, you will have to provide the lender with your tax returns for the past two years.

* If you are employed by a relative
* If you are self-employed
* If you work on commission
* If bonuses account for 25 percent or more of your income
* If you own two or more rental properties.

If you receive income from other sources, such as child support or disability pay, you must provide proof that you are entitled to it, and in addition, that you are receiving it.  This could be canceled checks, divorce degrees or other contracts.

Finally, if you have been unemployed for 30 days or more at a time, you will have to provide the lender of an explanation telling them why.

Closing Cash

You’ll likely have to come up with some cash in order to close on your property, but you’ll have to get some paperwork in order for that, as well.  In short, you will have to provide documentation for every cent that you use—if it’s above your normal account balance.

For example, if you’ve always had $1,000 pad money in your account, and then suddenly you have $10,000 in the account to be used for buying the property, you will have to show where it came from.  If it’s a gift, then you’ll have to provide the lender with a letter from the giver explaining that the money was a gift, along with a copy of the check, and in addition, the deposit slip from your account showing the date the deposit was made.

Do this for every increase or large out-of-the-norm deposit that your bank statement shows, because the lender will require explanations for them.

Credit Issues

Another area of your personal finances that will require heavy documentation is your credit report.  When a lender considers you for a loan, one of the first things that they’ll do is check your credit report.  If they find discrepancies or bad marks, they will need an explanation before moving forward.  One way you can speed up the loan process is to have them ready before they even ask.

Start by getting a copy of your credit report and looking it over.  Are there things that don’t belong?  You have to right to contest false statements on your report, but know that the credit reporting agencies have thirty days to respond to a complaint.

If there are bad marks on your report that are justified, you will have to face them head on.  One way to do this is to write a letter of explanation to your lender.  For example, if you were unemployed the prior year and your report shows that you were late two times on your car payment put the reason in writing and submit it.    Remember, the key to a good letter is to show the problem, but more importantly, show the lender how you fixed it, and assure them that it won’t happen again.

These are just some of the things  you can do ahead of time to make your loan application process go smoother.  By being prepared, you have a better chance of getting a loan, and getting it faster!