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Getting prepared to apply for a Home Mortgage

I would say that most people at some point or other in their lives have made the decision to purchase a house, condo, or other abode for their primary residence, second home or as an investment.  Either way having made the decision to do that you will need a certain amount of preparation to see if you will qualify for a mortgage and if you do qualify for how much?  Assuming you’ve chosen your ideal Loan Officer you are now ready to proceed with the job of pre-qualifying.  Now when you start getting into the process your Loan Officer is going to require several things from you;

Two most recent years tax returns(including W-2’s). 

Two most recent pay stubs.                                                                                                                                                                                                                                                                                                       Source of funds(down payment and reserves if required).                                                                                                                                                                                                                                                                                     These are the minimum requirements to get started and will allow the Loan Officer to have confirmation of your income and assets(funds).  In addition you will be required to fill out a Uniform Residential Loan Application which is basically a snapshot of your financial health.  This gives the Loan Officer the ability to evaluate your credit, income, and reserves among other factors to help make an evaluation of your worthiness to take on debt.  In addition you will be reviewing and signing a multitude of documents called disclosures which for the most part are required by government for compliance.  This is important because you need to be in compliance with the Mortgage Disclosure Improvement Act(MDIA)  which was enacted to hopefully reduce the number of people who might be defrauded by Loan Officers who might not be working within the range of the law and provides a vehicle to protect borrowers.  I will cover this in a later segment with more details.  You might think a lot of the disclosure forms are redundant and maybe useless but are required and make sure you understand what you’re signing.  I can’t urge you enough to ask your Loan Officer if you don’t understand what a form means.  The forms that will be specific to your situation will be the Good Faith Estimate and Truth-in-Lending Disclosure Statement.  These forms will set the tone for your entire transaction because once you sign them it obligates the Loan Officer and Lender to what can be changed prior to you signing your loan documents without your signed approval.  Again we will address those issues at a later time.                                                                                                                                                                                                                                                       Now once you have reviewed, understood, and signed your disclosures the supporting documents(pay stubs, etc) will come into play because those items will weigh heavily into the ultimate decision of approval or non-approval.  Not that borrowers are intentionally going to give false information but in many cases people aren’t sure what their actual income or available money is so having this documentation basically eliminates potential problems down the road.  The next thing your Loan Officer will do is take that information along with your work history, current obligations and other factors and evaluate them together to figure if and how much you can qualify for.  This will allow him or her to give you or your Realtor a pre-qualify letter.  What that will do is allow you to have a document that should let you start looking for a house.  The reason I say “should” is there are some sellers of REO(real estate owned) or foreclosed properties who will require a pre-approval from a Mortgage Bank like First Nations Home Finance.  The difference between a Mortgage Bank and other loan originators is that we have direct authority to approve loans based on available information whereas a Broker(who is another originator of mortgages) for the most part doesn’t have the ability to get a loan under-written upfront.  Holders of REO properties want more assurance that the buyer will be able to get financed and a pre-approval is better than a pre-qualify as far as chance of getting the loan done although there are no absolutes.  And hopefully you’ll be approved and awaiting an accepted offer for the home of your dreams!