Mortgage University
Loan Application 101
by Craig Goebbel
President & CEO, LoanTek, Inc.

GETTING READY TO APPLY FOR A LOAN?

Rates have been down, up, down, up and down again. Do you get the picture? Although 30-year fixed rates have been trading in a very narrow range, that range centers on under, or over 7.0%. This seems to have created a psychological threshold among many of you. You want a loan under 7.0% and won’t touch a 30-year fixed rate at 7.0% even when you are sitting on an 8.0% loan. What should you do? Our advice is don’t miss the parade. Getting started now will at least get you in line with the huge number of people already started. Lenders are very busy and you need to be prepared to expedite your transaction whether it is a purchase or refinance.

JUMP START YOUR LENDER

You help yourself by bringing certain exhibits to the interview, ready to be copied. Bring every page of your last three months bank statements. If you have stocks, bonds, mutual funds, IRA or retirement accounts, bring a recent statement for each account. This information is essential to verify closing funds for a purchase. It is necessary on a refinance transaction to get your complete financial picture.

If you are an hourly or salaried employee, bring your last pay stub and W-2. You will need to bring your 1099s to verify interest and dividend income and your 1099-SSAs to verify social security income.

If you are self-employed or earn 25% or more of your income through commissions or profit sharing, then bring your last two years tax returns, every page! If you own a corporation, bring those returns, as well. You will also need to provide a year-to-date profit and loss statement.

If you have the appropriate exhibits, you’re ready to get going. Use the application interview to get all your questions answered; receive all disclosures and a written Good Faith Estimate. Don’t panic if you can’t provide everything at once, but be prompt in providing those missing items. Giving your lender everything she needs up front makes her work, and your transaction much easier and faster.

TRUTH-IN-LENDING AND APR

This form is also known as Regulation Z, Reg. Z, or just TIL. Every lender is required by law to provide one on every owner-occupied one-to-four family purchase or refinance loan. This form is supposed to inform you of the true cost of your loan. Unfortunately, its design and implementation fails to accomplish this. Why? The regulation allows each lender to comply in their own way, so everyone does the calculations differently. Comparisons of loans using this form are useless.

How do you do a smart comparison? It’s easy. Make certain you receive written Good Faith Estimates from each lender using the same interest rate, term, and loan amount and closing date. Then eliminate charges for property taxes and homeowners insurance and compare. The lender with the lowest costs will be your best deal, presuming levels of service are comparable and their Good Faith Estimate is accurate.

© 1999 - 2004 LoanTek

Craig Goebbel is President and CEO of LoanTek.com, mortgage loan brokerage.  He is also producer and host of Real Estate Radio Show, a Seattle-based talk show featuring mortgage and real estate news, interviews and listener calls. It is broadcast on KVI Radio AM 570 in Seattle, Washington. Past show are also webcast via the Internet at http://www.realestateradio.net.

Real Estate Radio Sponsor

Real Estate Radio with Goebbel and Gray is the leading real estate radio talk show in the world and is hosted by Real Estate home mortgage expert Craig Goebbel, owner of LoanTek Home Loans and Robb Gray of John L. Scott Real Estate.