The process of applying for a mortgage is tedious and time-consuming; it requires you to answer personal questions about your finances. To ascertain your credibility for a mortgage, lenders structured the application process in such a way that allows them to get as much information about borrowers either directly or indirectly.
Before you decide to apply for a mortgage; it's best you familiarize yourself with some of the possible questions the lender would ask about your finances. Because it involves a considerable amount of money, you should be prepared to answer questions about disparities in your income, why you defaulted in making any accrued payments and questions about your credit history.
Below are some of the possible questions your lender would ask relating to your finances.
How long have you earned your present income?
Lenders want to ascertain if you have earned your present pay for over two years. If you just got promoted or got a salary raise recently, this is good. However, what most lenders are looking out for is a consistent income amount for the last year. If they are not sure of your income, they would take a look at your W-2s for previous years and your pay stub for the present year. Before you go ahead to make an offer for a house, ensure it's an amount your current income will support.
How often you get paid?
A lender wants to ascertain how much income you earn, how your pay is derived, and the steadiness of your salary or irregularity of income. If you receive a steady means of income, your annual salary would determine how much mortgage you get – if your income varies, you might be required to provide details.
The disparities in your income
If your income keeps changing each year either positively or negatively, come prepared to explain the reason behind the fluctuation. If your revenue decreased from the previous year, there is every possibility the underwriter would select the worst period in the last two years to determine how much you get on a mortgage. However, if your income increased in the previous year, the underwriter would take the average of the last two years to determine your mortgage value. If your income rises yearly either due to promotion or a new position, get someone from your human resource department to write a letter to that effect.
If you are new at your job
Being new at a job doesn't affect your application for getting a mortgage – as long as you are receiving either a salary or a full-time hourly rate. Some lenders even grant loans to individuals who haven't gotten their first paycheck if they have a fully executed employment contract.
If you earn commissions
If you are a salesperson who earns a commission, you would need to provide two full years of tax returns to determine non-reimbursed business expenses you wrote off.
Before applying for a mortgage, ensure you take a second look at all your finances and identified anything that could act as a deterrent so that your application has the best chance of being approved.
Terese Ferrara is a long-time resident of the Bay Area and has been a partner with The Goss Real Estate Group for many years. She and her husband raised their two daughters in San Jose, where she successfully continues to build her real estate career.
After earning a bachelor’s degree from San Jose State University, she went on to teach in the San Jose Unified School District for 9 years. Transitioning to real estate was a logical choice, utilizing her patient demeanor to educate all levels of buyers and sellers. Knowledge and experience demonstrate her vested interest in delivering the highest level of care and professionalism to every client. She consistently strives to exceed her client’s expectations throughout the entire real estate transaction and remains a trusted advisor long after each close.
As a board member on KW Bay Area Estates’ Associate Leadership Council (ALC), she aids in support of culture and professional development strategies for over 180 associates. Terese is also a Director for the Santa Clara County Association of Realtors Foundation, which supports community service initiatives in Silicon Valley.
Terese is the consummate real estate professional dedicated to providing unparalleled service to her clients through ongoing training and education, keeping her on top of the dynamic market and latest real estate trends. Her high-touch approach coupled with honesty and integrity support her commitment to her client’s real estate needs.
