When I say that, I’m not trying to scare you. I’m trying to get you to see it from their point of view.

But Who Are “They”?

“They” are a bunch of people, but the only one that you need to know about is the underwriter. The underwriter represents the rest of “they”.

And “they” have a lot of questions.

You would too if someone wanted to borrow $200,000 from you.

They aren’t bad people. They aren’t trying to make your life a living hell. They just want to make sure you are a safe bet. As safe as a bet can be, anyway.

Know when to hold ‘em

It is the underwriter’s job to assess the level of risk your home loan application represents and verify that it meets certain criteria, which are set by the rest of “they”.

Your pros and cons are weighed. Let’s look at some cons:

• Have you had a bankruptcy?
• Have you had any gaps in employment?
• Do you have collections on your credit report?
• Have you had any judgments against you?

And on and on. But it’s not the questions that matter, so much as the answers to those questions.

You must have a certain amount of time between your bankruptcy discharge and applying for a home loan. You have to satisfy any judgments against you before you apply for a home loan. Some collections need to be paid. Gaps in employment, well I talked about that in the last post.

You Got Some ‘Splainin’ To Do

Whatever “negatives” you might have, you more than likely need to have a Letter Of Explanation. A Letter Of Explanation details what happened, why it happened, and in an ideal world, why it’s unlikely to happen again.

I am frequently asked, when discussing Letters of Explanation with clients, what the letter “needs to say”. I will tell you this:

There is no right answer.

Like I stated before, if you thoroughly explain what happened, the circumstances that led to it, and why you are unlikely to go through that again, you are doing it right.

Applying for a home loan can be a stressful situation, and having negative credit issues can amplify that stress. But good preparation can alleviate future frustration.

I have been writing a series on the subject precisely because I have met a lot of people lately who have been surprised at the answers to their questions about applying for a home loan. I’ve also been putting together a video gallery of answers to frequently asked mortgage questions.

Have questions about applying for a home loan in Oregon or Washington? Call me at 503.799.4112, or use the following no-spam-guaranteed form:

And as always, feel free to comment below. Thanks!

Applying for a home loan – Break Yo’ Self! originally appeared on home loan ninjas on October 24, 2011.

“I missed some work last year. Is that a deal-breaker?”

The short answer is no. But let’s make that answer a little longer.

Employment Gaps – How’s That “Work”?

Gaps in employment happen for many different reasons. In our current economic funk, nobody is really shocked that it happens.

I’ll give you a recent scenario.

A teacher with many years on the job took a leave of absence last year and wants to buy a home this year.

What was the reason for the leave? She had an elderly parent dying, and she took time off to care for them at the end of their life.

This is a pretty easy scenario for an underwriter to look at and say, “it happened one time. It probably won’t happen again”. She has a ton of time on the job. It was not an event that is likely to occur again.

This is not a high-risk situation.

In this instance, we just provided recent paystubs, a Verification of Employment, and a Letter of Explanation. That doesn’t sound so painful, does it? Two of the three (paystubs and Verification of Employment) were required anyway.

You see, the thing is this…

A Letter of Explanation is exactly what it sounds like. You write a letter explaining your situation. Clearly detail the reason why you had a gap in employment. Give the date you left employment, and the date you returned.

The more your explanation sounds like a one-time occurrence, the more likely it is that your home loan is going to be approved.

And We’re Back!

The length of time back on the job required varies depending on the home loan program you are applying for. Depending on the situation, it might be as little as 30 days. Not bad!

If you have questions about a gap in employment and applying for a home loan in Oregon or Washington, give me a call at 503.799.4112 or fill out this quick, no-spam form:

And, as always, feel free to leave a comment below. Thanks for visiting!

Applying for a home loan – Employment gaps originally appeared on home loan ninjas on October 23, 2011.

No, that’s not where the Terminator underwrites your loan.

Here’s the video (link for mobile viewing)

Automated Underwriting System – Rise of the Machines

Hello Mr Anderson

Okay, so machines don’t exactly run our lives. But they are very important if you are trying to buy a home or refinance.

When I begin with a new client, I gather up all of their information and documentation, and then “run” their file through the automating underwriting system (AUS) that is appropriate for the loan program they are applying for.

As I said in the video, there are 3 big ones that cover most situations:

• Fannie Mae’s Desktop Underwriter
• Freddie Mac’s Loan Prospector
• GUS

Yes, you are correct. GUS has by far the coolest name of the three. That’s the underwriting engine used for USDA home loans.

But how does it work?

When I take a loan application, I put all of that information into a computer program. That computer program generates all of the disclosures associated with your loan, and serves as the foundation of our workflow as your loan progresses along.

It also exports that information into a file format that is compatible with the automated underwriting system.

I import that file into the AUS, and enter a couple other pieces of information, and then click the “submit” button.

The AUS compares the information in your file to the underwriting guidelines, sprinkles some pixie dust, and viola! Out comes your loan approval.

Garbage In – Garbage Out

As with anything, the accuracy of the data entered into the AUS is of paramount importance. Your automated approval means nothing if it is based on inaccurate information.

That is why I gather up the following information BEFORE I run my clients through an automated underwriting system:

• Most recent 30 days of paystubs for all borrowers
• Most recent bank statements; all pages, all accounts
• Most recent retirement or 401k statements
• Last 2 years Federal tax returns; all pages, with w2s
• Business tax returns if applicable
• Divorce decree/child support paperwork if applicable
• Award letters for Social Security/VA/Disability if applicable
• Pension letters/Annuity statements if applicable
• Bankruptcy Discharge paperwork if applicable

This allows me to your file through the AUS with the most valid and accurate information. That drastically reduces, if not completely eliminates, any surprises later in the process.

Do you have questions about how automated underwriting works, or home loans in Oregon and Washington? Give me a call at 503.799.4112 or fill out the following contact form. I promise, you will not be spammed. I don’t have time to irritate people :-)

Also, feel free to leave a comment below. Thanks!

Automated Underwriting System – Huh?! originally appeared on home loan ninjas on October 20, 2011.

In sharing that information with a local Real Estate site I write for occasionally, it dawned on me that you need to know quite a bit about yourself in order to fill out a really complete application.

Applying for a Home Loan: Know Thyself

I’ve been telling people forever that they should gather all their financial “stuff” up before filling out the loan application. You need to anyway, so better to start out right.

Today I solidified my thoughts in two lists:

1. stuff you need to know, and 
2. stuff that helps you know it

So here’s some stuff that you probably don’t think about very often, but you need to know when filling out the application:

• Detailed residence history for the last 2 years
• Detailed employment history for the last 2 years
• Knowledge of your various bank accounts, retirement accounts, and other liquid assets
• Social Security number
• A good idea of your credit history – dates of bankruptcy discharge, etc

Sounds pretty involved right? Well by golly, here’s a list of stuff that might help with some of that:

• Most recent 30 days of paystubs for all borrowers
• Most recent bank statements; all pages, all accounts
• Most recent retirement or 401k statements
• Last 2 years Federal tax returns; all pages, with w2s
• Business tax returns if applicable
• Divorce decree/child support paperwork if applicable
• Award letters for Social Security/VA/Disability if applicable
• Pension letters/Annuity statements if applicable
• Bankruptcy Discharge paperwork if applicable

That might sound like paperwork overkill, but you need to have all that stuff anyway in order to get the loan funded (unless its a Streamline refinance).

So, put all that stuff together before applying for a loan. It will make your life easier once the process starts.

Cue “The More You Know” :-D

Questions about applying for a mortgage or the home loan process in general? You may fire when ready via any of the following channels:

• 503.799.4112
• Google+
• jason@mypmb.us
• Facebook
• Twitter
• Quick contact form

And of course, if you are in the area surrounding Portland, OR and Vancouver, WA well then:

Also, make sure to subscribe to updates!

• RSS feed
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Applying for a Home Loan | What You Need originally appeared on home loan ninjas on October 5, 2011.

Here’s a downloadable copy of the application for you to follow along with:

Download (PDF, 23.74KB)

Home Loan Application – Page 3

On the third page of the loan application, we find section 6, which takes a look at your assets and liabilities. In the left column, you itemize your checking accounts, savings accounts, retirement accounts, stocks, and even life insurance that have cash value. These are called “liquid assets”.

You also can list the cars you own, and what they’re worth. However, I’ve never run into a situation where the automobile you drive and what it is worth has been the determining factor in your loan getting approved.

In the right column, you can itemize your monthly liabilities. These are the items that show up on your credit report. However, most loan origination software, like the kind I use, will automatically populate this information when your credit report is pulled.

There are also lines for you to enter the amount you may be paying for alimony, child support, and job-related expenses.

Under these columns is the “schedule of Real Estate owned”. In this section, you list any Real Property you already own, as well as any mortgage payment, Real Estate taxes, hazard insurance payments, etc. that you pay on those properties. If you are renting the property, you would also enter the rent payment that you receive.

Right under the schedule of Real Estate owned, there are a couple lines for you to list any alternate names you might have credit accounts under. So, if you are an undercover agent with a credit card, this is the place to disclose that :-)

Loan Application – Page 4

Here we have the final page of the home loan application. On the upper left hand side are the details of the transaction. Purchase price, refinance amount, closing costs and prepaid items, seller paid closing costs, etc. Item “P” at the bottom of this column is the bottom line; the cash you need to close the transaction. Kind of important to know!

On the right side of page 4 we have the “Declarations”. These are rapid-fire, “yes or no” questions. Are there judgments against you? Are you currently in default on any debt? Are you a co-signer on any other debts? Are you a US Citizen?

Below these upper sections, there is the fine print. It is…well, it’s fine print. You are attesting as to the truth of the statements made herein, there shall be recourse should you default, and other legalese. You sign and date underneath this section after you have read all the fine print.

But it’s not over…

You would think you were done after this, but you’re not. The Government Monitoring section is below your signature. This section was created to ensure that lending institutions are not discriminating based on sex, ethnicity, or race. You can choose to not complete this section. However, if the interview was done face-to-face, I have to complete it based on visual observation.

At the very end is where I sign it, and my company information.

And that is, as they say, a wrap.

Do you have any questions about applying for a home loan? Questions about the home loan application? Feel free to ask me via any of the following channels:

• 503.799.4112
• Google+
• jason@mypmb.us
• Facebook
• Twitter
• Quick contact form

And of course, if you are in the area surround Portland, OR and Vancouver, WA well then:

Also, make sure to subscribe to updates!

• RSS feed
• Newsletter

Applying for a Home Loan | The Loan Application Part 2 originally appeared on home loan ninjas on September 30, 2011.

The application itself can be an intimidating document, so I thought we’d take a walk through it.

Sidenote: Since the the “rebirth of slick” I’ve been going through my old Youtube videos to see what can still be useful here. Here is a classic one I made about the Universal Residential Loan Application (link for mobile):

Applying For A Home Loan

If you feel you are ready to apply for a home loan, then you probably need to get yourself a loan application. You can check one out right here:

Download (PDF, 23.74KB)

Page 1

On the first page, we see some basic stuff. Section 1 covers the type of mortgage and the terms of the loan. What’s the loan amount? What’s the interest rate? Is this an FHA home loan, or Conventional?

Just Kidding ;-)

Section 2 of page one defines basic property information and the purpose of the loan. What’s the property address? Are you buying a home, or refinancing your current mortgage? Is this property going to be your primary residence?

Section 3 of the first page of the loan application is all about you, the borrower. Your name, Social Security number, address, mailing address, how many dependents you have, etc.

Page 2

Page 2 of the home loan application goes more in depth about you. Specifically, it’s about your employment and income.

In section 4, detailed information about your employment history. Name, address, and phone number for your current employer and previous employer. The phone number should be HR, or whichever department at your company would perform a verification of employment. Also, it’s important to know how long you’ve been on the job, how long you’ve been in that line of work, and the dates you worked at previous employers. It should be noted that your employment history only needs to go back 2 years. If you’ve been at your current employer for 6 years, don’t worry about previous employment.

If you are self-employed, fill in your company’s information.

Section 5 covers your income. It breaks down your income into categories, like base salary, commission, and overtime. There is also a section to report disability, Social Security, alimony and child support income.

Section 5 also covers your monthly housing expense. Do you own or rent? What are the property tax and insurance payments per month?

That’s half the loan application. By now you are starting to get a taste of the paperwork involved when applying for a home loan. I will save pages 3 and 4 for another post, otherwise I fear you might bonk your head passing out on your keyboard :-)

Do you have any questions about applying for a home loan? Questions about the home loan application? Feel free to ask me via any of the following channels:

• 503.799.4112
• Google+
• jason@mypmb.us
• Facebook
• Twitter
• Quick contact form

And of course, if you are in the area surround Portland, OR and Vancouver, WA well then:

Also, make sure to subscribe to updates!

• RSS feed
• Newsletter

Applying for a Home Loan | The Loan Application originally appeared on home loan ninjas on September 29, 2011.

“How long does a buyer have to wait after they have discharged a BK before they can apply for another loan? Are there different waiting periods for FHA, VA and Conventional Loans?”

Well Fred, here’s your answer…ninja style:

It is important to note that all timeframes I discuss in the video are from the date of discharge. Depending on the circumstances, that can be a couple months after you file. Many times, it is the better part of a year. It all has to do with how complicated your filing is.

In the video (link for mobile), I mentioned the distinction between financial mismanagement and “extenuating circumstances”. Generally speaking, “extenuating circumstances” means you had to file bankruptcy due to something that could not be foreseen, and is extremely unlikely to become a repeat performance. Situations like extreme medical calamities or the collapse of a business can make your bankruptcy “look better” when applying for a mortgage.

Don’t be late…

Something you must keep in mind when considering whether to apply for a home loan after bankruptcy is you absolutely need to be on time with all of your payments after the discharge. Not only will a clean payment history help to rebuild your credit, but it goes a long way in demonstrating that your delinquencies are not a pattern, but a one time occurrence.

Rebuilding good credit history is crucial. Now, you don’t want to start racking up debt the moment you get new credit offers in the mail, but you do need to re-establish yourself with some accounts that illustrate your ability to repay debt. The little $300 credit card from a department store is a good start, but try to stay away from too much of this “revolving” debt. Installment debt, such as car loans, are the best way to help rebuild your credit rating. But remember, keep it small and affordable. If you do get a revolving account, keep the balance under 33% of the credit limit.

When you are ready to apply for a home loan, you need to make sure you have all of the discharge paperwork. Not only will the lender need to see it, but it can help to dispute any items that were included in the bankruptcy that continue to report inaccurately to the credit bureaus. Now, this isn’t supposed to happen, but it does. Creditors that were included in your bankruptcy sometimes don’t update accurately, and your discharge paperwork goes a long way towards correcting any inaccurate information.

Thanks again to Fred Stewart for a great question. If you have any questions about applying for a home loan, feel free call me at 503.799.4112, email me at jason@mypmb.us, or fill out the following no fuss, no muss contact form. I promise there will be no spam!

Applying for a home loan after bankruptcy originally appeared on home loan ninjas on January 4, 2011.