Friday, March 13, 2009

What Do Lenders Consider During the Home Mortgage Approval Process? [By Nathan Navachi]

This article will give you a perspective through the eyes of a bank or financial institution so that you can know what they are looking for when it comes to deciding whether or not somebody is considered a trustworthy borrower, and what goes into the mortgage preapproval process.
The Difference Between Prequalified and Preapproved
While people will sometimes use the words prequalification and preapproval interchangeably, these two words do not mean the same thing and it is important to understand the difference.
Prequalification means that you have met with someone at a financial institution and discussed the particular issues of your personal finances such as your income, assets, commissions, and debts, and from that discussion the lender has offered an educated opinion as to how much money you are qualified to borrow.

Preapproval is a much more in-depth evaluation where the financial advisor will actually go over your paperwork such as past paychecks and pay stubs, tax forms such as W2's and 1099's, bank statements, credit reports, and any assets that are owned. After this evaluation you will receive a letter from the lender that specifies how much money you are allowed to borrow pending a good review of the property to be purchased.

What Type of Paperwork Does The Lender Look For?
One important thing that your financial institution will look for when deciding whether they should or shouldn't give you a loan is your credit score and past credit history. If you have a good history of paying back you credit cards on time, especially if you can spend $10,000 or more in a month and then pay it off rapidly, this is a good signal of financial competence.
So what to do if you have a low credit score or an unattractive credit history? Start by not charging anything more, and then pay off all your credit card balances down to zero. From then on, only charge on your credit cards what you have the money in the bank to pay off immediately.

Lenders will also consider your income over the past months and years by reviewing your paychecks and pay stubs, and they will also look for your tax forms to verify your income. They will want to see the paperwork for your other bank accounts or investment accounts so that they can verify your current assets and work that number into the total evaluation.
Also important is your current outstanding liabilities such as credit card debt or other loans. With all of this information, plus any other information deemed appropriate to your personal financial picture, your bank will decide how much money they would be willing to lend you for a home loan.

Nathan Navachi is an expert in the mortgage industry and specializes in mortgage refinancing information. You can read more of his expert advice at

Article Source:

Falling Home Prices Impacts more than Home Equity [By:Catherine Brock]

The impact of falling home prices on home equity values has been well documented; but now, other areas are being affected, as well.In the board game Mouse Trap, a crank-operated device sets off a series of events that ends with one player getting stuck in the trap. Today's real estate industry seems to have its own game of Mouse Trap going on, as falling home prices create unexpected consequences that can catch homeowners, local governments, renters, and property investors off guard. Incredible shrinking home equity Through the end of September 2008, the Standard & Poor's/Case-Shiller home-price index had fallen more than 23 percent since its highpoint in 2006. That equals an average decline of $23,000 for every $100,000 of original home value. The impact on household home equity has been striking; existing home equity credit lines have been cut or canceled, and thousands of homeowners have fallen underwater on their first mortgages. Existing homeowners and new homebuyers are also facing opposition from lenders in securing equity-based financing going forward. Property tax appeals galore Declining home values carry at least one silver lining in their clouds: lower property taxes. Homeowners may get an automatic reassessment, but it's more likely that they'll have to appeal to realize such savings. The amount of the reduction will vary, depending on when the property was last assessed. New homebuyers won't see a huge difference, but those who purchased in 2005 and 2006 could come out with a substantially lower tax bill. Unfortunately, these savings will come at the expense of local governments. Already, many agencies are cutting services, laying off employees, and imposing furloughs to adjust to changing economic conditions. Further reductions in property taxes will widen those budget shortfalls. Rental market madnessThe home rental market is getting a nice boost from anemic home values-mainly because no one wants to sell their property when market prices are so weak. People who don't have to sell are choosing to take rental income while they wait for property values to recover. Existing rental property owners are feeling the extra competition as more homes become available for rent. At the end of January, The New York Times reported that rents in the Big Apple were dropping fast. Landlords in other smaller communities, however, are still reporting steady demand from well-qualified renters. A combination of factors may be contributing to this trend, including the unstable housing market, uncertain job outlook, and a tight lending environment. Those who feel that buying a home right now is a touch scary are content to rent until economic conditions change. Sliding home prices have set a lot of wheels in motion, and those wheels are impacting far more than home equity values. Local governments, renters, and property investors, as well as homeowners, are going to feel the brunt until this housing market recovers.

Your Free Annual Credit Report - Who Looks at it and Why [By Jeremy Englewood]

Did you know that if you're applying for a new job or are being considered for promotion, your employer (current or prospective) can ask to see a copy of your credit report? Here's a list of entities that are allowed to request for your report and what they use it for:
Current and prospective employers. Many employers are now requesting for copies of their employees' credit report to conduct background checks, and when considering an employee for promotion or reassignment especially for key or sensitive positions. Before they can get a copy of your credit information, however, employers must get your written authorization and provide certain disclosures.
Government agencies. If you have applied for public funding assistance, government agencies may request to see your credit report to check if you are eligible for funding. Their purpose is to see if you have other sources of income or have any assets they're not currently aware of. If you have kids and are in the midst of a divorce, state and government officials may get a copy of your annual credit report to see if you can make child support payments.
Insurance companies. If you apply for an insurance policy, the insurance company can ask to look at your report in order to check your medical history or see if you have filed health insurance claims in the past.
Collection agencies. Collection agencies can look at your report if they are trying to collect an overdue debt from you. Their purpose is to find out what assets you have. Judgment creditors will also want to look at your report to decide if they will begin collection efforts against you.
Potential creditors. If you have applied for credit, credit companies and lending agencies will usually look at your free annual credit report to see if your credit score is high enough and if you have a good payment history on your other debts and revolving credit accounts.
Landlords and mortgage lenders. Because a home mortgage or rent arrangement is a long term endeavor, mortgage lenders will scrutinize your report before lending you money to buy a home.
Utility companies. Utility companies may ask for a copy of your report from a credit bureau in order to get a picture of your payment history and habits. Your free annual credit report may be a deciding factor on whether you will be allowed to subscribe to certain monthly plans or not.
Grant and student loan lenders. If you're applying for a grant or a private student loan, the lender may ask to see your report in order to check your ability to pay.
Your credit report is a confidential document. While the Federal Credit Reporting Act places certain restrictions on who can get a copy of your report, you should periodically get a copy of your annual credit report free and check to see whether unauthorized parties have been given access to your credit information.
Check out our website for articles on how to get your annual report for free and other useful advice on credit repair. You'll find a wealth of practical and valuable information on credit repair and other personal finance topics.
Jeremy Englewood is a credit manager and writer with over fifteen years experience in the banking industry. His sensible and practical advice on personal finance topics have provided inspiration to people who want to establish or repair their credit. You can read more of his articles and advice on your free annual credit report at
Article Source: