Sunday, November 8th, 2009 at
12:36 pm
Applying for a mortgage usually means you will get a blizzard of paperwork to sign.
Many of these papers are “disclosures”. These are often mandated.
Important disclosures include:
credit score information disclosure
good faith estimate
equal credit opportunity act disclosure
The credit score information disclosure lets you know what your credit scores are. These are typically ratings given to you by the three different credit bureaus. This can be the basis for understanding your credit and starting the process of working on your credit if there are issues.
Good Faith Estimate
A good faith estimate is an estimate of a range of closing costs involved in getting the loan, including:
lender
broker
escrow company
title company
hazard insurance company
appraiser
government fees
taxes
other fees
It is important to remember that these costs are just estimates. They can change. It is an “estimate” of mortgage costs, not a guarantee.
The equal credit disclosure is an anti-discrimination disclosure.
There are numerous other disclosures, but the ones of interest to most potential borrowers are the good faith estimate and the credit disclosures. These are the ones with the potential to have a direct impact on people’s financial results.
Other disclosures include authorization to check credit, verify employment status, assets, income documentation, and other pertinent information.
By: Ben Afzal
Related Posts:
Thursday, July 30th, 2009 at
1:28 am
Basics
Your debt to income ratio is a basic measure that mortgage lenders use. It involves:
Total monthly debt loadTotal pretax incomeOverall ability to payTotal Monthly Debt Load Your total monthly debt load that a lender will analyze includes: Credit cardsStudent loansCar paymentsDepartment store cardsOther monthly debt paymentsYour mortgage paymentThis is the sum total of your usual monthly debt payments. In some cases a lender may ignore a debt totally. This is the case, for example, if you have a $500 a month car payment but there are only two more months left on the loan. The lender may choose to ignore this $500 per month debt load because they know if will go away shortly.
Lenders should be able to figure out the monthly debt balances and when they expire from your credit report, although you should also disclose relevant items to them in your mortgage application.
Lenders will also factor in the expense of the new mortgage your are applying for. This includes the mortgage payment, property taxes, home owner association dues, hazard insurance, and any other property related expenses.
Total Pretax Income The lender will add up all your pretax income, which may include:
Base salarySales commissionsBonusesOvertimeRental incomeInterest incomeOther incomeAll of this income is added together to figure out your pretax income. They may take an average of your past year’s monthly earnings. Temporary jobs or seasonal work may not be added into this total because it is not considered regular work or income.
Total Overall Ability To Pay The lender will compare the borrower’s total overall monthly debt load with their monthly pretax income.
If a borrower’s pretax income is $10,000 and their monthly debt payments are $4,000 then the borrower has a debt/income ratio of 40%. This is acceptable to many lenders.
New Opportunities Many lenders will now allow a total debt burden of as much as 55% of the borrower’s income.
This allows more people to be able to buy a property. Lenders may compensate themselves for the additional risk of this type of loan with a higher than normal interest rate.
By: Ben Afzal
Related Posts:
