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[H545]Home Mortgage Loan Application

by Brad Stroh, Bra

A home loan application can be very confusing for some people. If you're in the market for a home, but have never even seen a home loan application, this guide will help you better prepare for your loan application. After reading this information, you should have a better understanding of the loan process.

Itemize Your Debt
Before you do anything, you first need to establish whether or not you can afford a loan. This will save you significant time and money. To figure out if you have the finances to take on a loan, you first need to identify your debt. List your items of debt on a piece of paper. Debt means anything you can't pay off within a month, such as car payments, credit card balances, alimony, etc. Collect all paper work related to your debt and create a list of everything. Your debt will come into play when applying for a loan so you need to know and have available everything related to your debt.

List Your Recent Addresses
Part of the loan application process involves listing your previous residences. This includes apartments and times lived with any relatives. It may be difficult to recollect every location you lived, so think back as far as you can. Your resident history should be listed on your credit report, which is something you should also obtain prior to the loan application process.

Credit Report
Before you even look at a loan application, get a copy of your credit report. To get a copy of your credit report, the 3 major reporting agencies (Equifax, Experian and TransUnion) are required by law to provide you with a complimentary copy of your credit report once every 12 months per your request. However, each agency will most likely have a different score for you depending on the particular credit information provided to that particular agency. So, if you want a better idea of what your credit score actually is, request your credit score from all three agencies and figure out the average.

List Your Assets
You've already listed your debt; now it's time to list your assets. An asset is anything that has monetary value. This includes stocks, bonds, savings account funds, vehicles you own out right, and other property. Just like with your debt, collect all relevant paperwork and list out everything. Your assets are advantageous to you when applying for a loan and are referenced in the loan application.

List Your Employment History
Your employment history is also considered when applying for a loan. So you want to have all paperwork connected to your current and prior employment on hand for the application. Collect any and all W-2 forms from the last 2 to 3 years. Your employment history is looked at during the application and scrutinized based on income and any recent shifts in employment status. Any sudden or unexplained job changes within approximately six months of applying for the loan will go under a scrutinizing eye. Lenders look for solid employee history. If you've been jumping from job to job within a six month period, it shows unstable or erratic income possibilities. As a rule of thumb, stay with one job for a significant period of time six months to a year prior to applying for a loan. As with your payment habits, try not to make any sudden job changes within the 6 months to 1 year period prior to applying for the loan. Income changes look especially suspicious. If you experience a sudden dramatic increase or decrease in income be prepared to provide a full verbal or written explanation along with your paperwork.

Get Your Financial History in Order
Next you'll want to be prepared to meet any stipulations, or stips, that could come with a loan application. Frequently, this will include copies of your last three months' bank statements and pay stubs. If you are really unorganized, there are programs that let you state your income and assets, but they usually come with a slightly higher rate or more fees from a lender.

If you follow these steps prior to applying for a loan, you'll be better prepared and have the most recent, complete, and up-to-date information for your loan application. Not having all the necessary documentation and itemized lists could delay the application process or even result in you not getting the loan.

A Full-doc or full documentation loan is a traditional loan which requires either PAYG records such as your last Group Certificate, current payslips/letters from employers or an extensive financial history for a self-employed person, as well as documentation on assets and liabilities.

Full-doc loans generally, but not always these days, offer the best rates in the market and Lenders Mortgage Insurance does not apply for deposits of 20% or more. Should you choose to pay mortgage insurance you may borrow up to 100% for your own home and 95% for investment loans.

Low-doc Loans

Low-doc or low documentation loans have been designed for self-employed people who dont have access to a documented financial history, which is required to secure a traditional Full-doc home loan (as above). To qualify for a Low-doc loan, you will need to show you have been self-employed for two years and would be GST registered which may be proved through various documents or information. You will also be required to show your assets and liabilities together with a Self Stated Income Declaration, which should reflect the true nature of your financial capacity.

Interest rates on Low-doc loans are typically the same as Full-doc loans through some major banks and may be slightly higher with other lending institutions. Lenders see these types of loans as a riskier option and as a result they generally carry a requirement for mortgage insurance above 60% LVR (Loan to Value Ratio) and in the past will require a larger deposit than a Full-doc loan. Nowadays we can get up to 90% low doc loans.

No-doc Loans

No-doc or no documentation loans are very useful for borrowers who want the least hassle in establishing a loan. As long as you are fully aware of your responsibilities under the loan and have access to the necessary deposit (30% deposit if self employed for less than two years and 20% with some lenders if an ABN has been in existence for over 2 years) then you simply make a statement that you are able to afford the loan without undue hardship. No income, assets or liabilities need to be stated. Interest rates are higher.

Some lenders even provide No-doc loans to salary employed people who have just started official self-employment (such as a professional investor with a new entity) as long as more than 50% of the applicant???s income is derived from self-employment.

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A Full-doc or full certification loan is a traditional loan which requires either PAYG records such as your last Group Certificate, current payslips/letters from employers or an sweeping financial story for a self-employed person, as well as documentation on assets and liabilities.

Full-doc loans generally, but not always these days, offer the best rates in the market and Lenders mortgage insurance does not apply for deposits of 20% or more. Should you choose to pay mortgage insurance you may borrow up to 100% for your own home and 95% for investment loans.

Low-doc Loans

Low-doc or low documentation loans have been designed for self-employed people who dont have memory access to a credentialed financial history, which is mandatory to secure a traditional Full-doc home loan (as above). To qualify for a Low-doc loan, you will need to show you have been self-employed for two years and would be GST registered which may be proved done various documents or information. You will also be required to show your assets and liabilities collectively with a Self declared income Declaration, which should reflect the true nature of your fiscal capacity.

Interest rates on Low-doc loans are typically the same as Full-doc loans through and through some major banks and may be slightly higher with other loaning institutions. Lenders see these types of loans as a riskier alternative and as a result they generally carry a essential for mortgage insurance above 60% LVR (Loan to Value Ratio) and in the past will compel a larger deposit than a Full-doc loan. Nowadays we can get up to 90% low doc loans.

No-doc Loans

No-doc or no documentation loans are very useful for borrowers who want the least hassle in establishing a loan. As long as you are fully aware of your responsibilities under the loan and have approach to the necessary deposit (30% deposit if self employed for less than two years and 20% with some lenders if an ABN has been in existence for over 2 years) then you simply make a statement that you are able to afford the loan without undue hardship. No income, assets or liabilities need to be stated. Interest rates are higher.

Some lenders even supply No-doc loans to remuneration employed people who have just started official self-employment (such as a professional investor with a new entity) as long as more than 50% of the applicant???s income is derived from self-employment.

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About Author

Both Brad Stroh & Ben Needles are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Brad Stroh has sinced written about articles on various topics from Auto Insurance, Bad Credit Home and Finances. Brad co-founded Freedom Financial Network in 2002 and Bills.com in 2005. Bills.com and Freedom have been recognized by the Inc 500 list, Entrepreneur Magazine's Hot 100, Best Places to Work in Silicon Valley and Phoenix. For more articles, visit. Brad Stroh's top article generates over 33100 views. to your Favourites.

Ben Needles has sinced written about articles on various topics from Business Credit Cards, Anger Control and Business Credit Cards. About the Author (text) Dave Dorian and his family having been investing for over 10 years and they collectively o. Ben Needles's top article generates over 550000 views. to your Favourites.