What Lenders Need to Know about You

HOW THEY DECIDE YOU ARE A SAFE BET

Your Personal Information

Simply put, lenders want to know you are a safe bet and that you'll pay their money back. Here's what they look at in order to make that decision:

Your past financial history

Your credit report, credit score and employment history

Your income

Your monthly expenses on credit cards, auto payments, student loans and other debts

Your savings

Your estimated net worth

Your Property Information

Lenders will have questions regarding your property including the following:

Are all claims against the property known? (This is the reason for a title search.)

Are the public records complete and accurate (This is the reason for title insurance.) Does the property need a termite inspection or property survey?

What is the accurate value of the property? (This is the reason for an appraisal.)

What is an appraisal?

An appraisal is an independent view of how much a property is worth.

Appraisals are common at the time of sale or refinancing and may include a check of the home's interior, upgrades and general condition.

Lenders will finance the property on the basis of whichever is lower—the appraised value or the sale price. Only a current appraisal is required for refinancing.

Appraisal amounts usually differ from tax assessment values.

Beware of appraisals that are too high or too low compared with like properties in the neighborhood

If the appraisal is too low, it's possible that you may not qualify for a refinance loan based on a lender's LTV (Loan-to-Value) requirement. LTV is the ratio of your loan amount divided by your home value.

If it's too high, you may end up offering and borrowing more than the house is actually worth which can hurt you should you decide to sell or refinance in the future.

If you are uncomfortable with an appraisal, ask a local real estate broker to review the valuation and, if there's substantial discrepancy, get a second appraisal.

One should consult with a qualified mortgage professional prior to implementing any mortgage strategies.If you are a tax, insurance, financial or financial planning professional receiving this newsletter, please call our office and introduce yourself to us. We are always seeking to grow our referral network and expose more service professionals to our client base.