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The Loan Process
Part
2 – Loan Application Last week we reviewed the process of
qualifying and choosing your loan agent. That done, you should be able to take
comfort that you will be properly serviced. There are however, a number of things you should know
about the loan application in order to keep your sanity. After all, this document, most commonly known as the
“1003” (ten-o-three), is one of the most tedious reading documents you will
ever lay eyes on. Technically speaking, I suppose this document should
be referred to as “ten-zero-three”. But, as you know, most are quite fine
calling a zero an “o”. Anyway, the 1003 is the assigned Fannie Mae number
located at the bottom of this four page legal-sized document. Font sizes range from three to eight, some of them
bold. There are some boxes, a couple of trick questions on page three, and of
course the usual unfamiliar legal jargon to boot. Of course the application is supposed to come with a
de-coding booklet so you can figure out what all this means. To fill
all this out generally takes the more studious about two hours, assuming that is
that one has beforehand been careful to gather all the documents together to do
so. That’s where we should start -with the financial
records you need to gather together. Before we do however, let me give you a life-saving
hint! Let your loan agent fill out the loan application for you! That’s right! Your loan agent can fill this out for
you in about fifteen to twenty minutes. Oh yes, of course they still need all the
documentation from you. But the loan application is much more fun for you to
review for accuracy than to fill out. And, this original hand-written document is primarily for giving the
lender’s underwriter the starting basis for making an approval. Take
some of the sting out this document.
After all, the underwriter is going to insist that you sign another 1003 at the
close-of-escrow. The new 1003 must be typed and have corrections made
to it. It will be based upon other information gathered that was not available
to you at the time you (or your loan agent) filled it out. This would include as
an example, information from a credit report or an appraisal. That being said, you should make sure to carefully
read all other disclosures and proposed agreements. Now, back to that list of needed financial records.
Two approaches will work. One approach is to provide your loan agent with only
a list of account numbers, phone numbers, and addresses for institutions you do
business with. This would include banks, credit unions, current
mortgage companies (if applicable), money market accounts, retirement accounts,
and the like. If you have significant assets it may not be
necessary to provide all, but this is not usually the case. This first approach then requires the lender to send by mail
verification requests to the institutions that you have provided. This alone
slows the process. Furthermore, institutions responding to these requests are inherently
slow to respond. If time is of the essence, the second approach is for
you. Provide your loan agent the following: ·
Two years
W-2’s ·
Your last
two paycheck stubs ·
Three
months of statements from financial institutions ·
Purchase
agreement (if applicable) ·
Retirement
account statements If the financing is on a townhouse or
condominium you will also need: ·
Homeowner
Association name, address & phone number ·
Copies of
CC&R’s & By-laws ·
Articles
of Incorporation ·
Current
budget If
you are self-employed, you must have been self-employed for not less than two
years and will need to additionally provide: ·
Last two
years tax returns ·
Current P
& L ·
Copy of
business license. Retired
applicants will need to show evidence of retirement income, i.e., Social
Security award letters, and pension income. Approach
two saves time. It also enables the loan agent to foresee any potential problems
needing to be cured, and thereby may also save you aggravation as well.
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