Congratulations on your new job! If you will be working for the same employer, complete the application as such but enter the income you anticipate receiving at your new location.
If your employment is with a new employer, complete the application as if this were your current employer and indicate you have been there for one month. The information about the employment you will be leaving should be entered as a previous employer. We will sort out the details after you submit your loan for approval.
Generally, a co-signed debt is considered when determining your qualifications for a mortgage. If the co-signed debt does not affect your ability to obtain a new mortgage we will leave it at that. However, if it does make a difference, we can ignore the monthly payment of the co-signed debt if you can provide verification the other person responsible for the debt has made the required payments, by obtaining copies of their cancelled checks for the last six months.
Any student loan which will go into repayment within the next six months should be included in the application. If you are not sure exactly what the monthly payment will be at this time, enter an estimated amount.
If other student loans are reflected on your final credit report, which will not go into repayment in the next six months, we may need to ask you for verification that repayment will not be required during this time period.
If you have had a bankruptcy or foreclosure in the past, it may affect your ability to get a new mortgage. Unless the bankruptcy or foreclosure was caused by situations beyond your control, we will generally require two to four years have passed since the bankruptcy or foreclosure. Equally important is your ability to re-establish an acceptable credit history with new loans or credit cards.
An installment debt is a loan you make payments on, such as an auto loan, a student loan or a debt consolidation loan. Do not include payments on other living expenses, such as insurance costs or medical bill payments. We will include any installment debts having 10 or more months remaining when determining your qualifications for this mortgage.
In addition to verifying your home's value supports your loan request, we will also verify your home is as marketable as others in the area. We will want to be confident if you decide to sell your home, it will be as easy to market as other homes in the area.
While we certainly do not expect you to default under the terms of your loan and a forced sale will be necessary, as the lender, we will need to make sure that if a sale is necessary, it will not be difficult to find another buyer.
We will review the features of your home and compare them to the features of other homes in the neighborhood. For example, if your home is on a 20-acre lot, or has a large accessory building, we will want to make sure there are other homes in the area on similar size lots or with similar outbuildings. It is hard to place a value on such unique features if we cannot see what other buyers are willing to pay for them. In some areas, additional acreage or outbuildings could actually be a detriment to a future sale. Finding comparable properties can be more challenging in rural areas where it is more difficult to find homes that have similar features.
We will also make sure the value of your home is in the same range as other homes in the area. If the value of your home is substantially more than other homes in the neighborhood, it could affect the market acceptance of the home should you decide to sell.
We will also review the market statistics about your neighborhood. We will look at the time on the market for homes which have recently sold and verify values are steady or increasing.
To determine the value of the property you are purchasing or refinancing, an appraisal will be required. An appraisal report is a written description and estimate of the value of the property. National standards govern not only the format for the appraisal; they also specify the appraiser's qualifications and credentials. In addition, most states now have licensing requirements for appraisers evaluating properties located within their states.
The appraiser will normally inspect both the interior and exterior of the home and then will create a written report for the Bank. You will be given a copy of the appraisal report at your loan closing. If you would like to review it earlier, your Mortgage Banking Officer would be happy to provide it to you.
After the appraiser inspects the property, they will compare the qualities of your home with other homes that have sold recently in the same neighborhood. These homes are called "comparables" and play a significant role in the appraisal process. Using industry guidelines, the appraiser will try to weigh the major components of these properties (i.e., design, square footage, number of rooms, lot size, age, etc.) to the components of your home to come up with an estimated value of your home. The appraiser adjusts the price of each comparable sale (up or down) depending on how it compares (better or worse) with your property.
As an additional check on the value of the property, the appraiser also estimates the replacement cost for the property. Replacement cost is determined by valuing an empty lot and estimating the cost to build a house of similar size and construction. Finally, the appraiser reduces this cost by an age factor to compensate for depreciation and deterioration.
If your home is for investment purposes, or is a multi-unit home, the appraiser will also consider the rental income that will be generated by the property to help determine the value.
Using these three different methods, an appraiser will frequently come up with slightly different values for the property. The appraiser uses judgment and experience to reconcile these differences and then assigns a final appraised value. The comparable sales approach is the most important valuation method in the appraisal because a property is worth only what a buyer is willing to pay and a seller is willing to accept.
It is not uncommon for the appraised value of a property to be exactly the same as the amount stated on your sales contract. This is not a coincidence, nor does it question the competence of the appraiser. Your purchase contract is the most valid sales transaction there is. It represents what a buyer is willing to offer for the property and what the seller is willing to accept. Only when the comparable sales differ greatly from your sales contract will the appraised value be very different.
As soon as we receive your appraisal, we'll update your loan with the estimated value of the home. We will promptly give you a copy of any appraisal, even if your loan does not close.
Since the value and marketability of condominium properties is dependent on items that do not apply to single-family homes, there are some additional steps which must be taken to determine if condominiums meet our guidelines.
One of the most important factors is determining if the project the condominium is located in is complete. In many cases, it will be necessary for the project, or at least the phase your unit is located in, to be complete before we can provide financing. The main reason for this is, until the project is complete, we cannot be certain the remaining units will be of the same quality as the existing units. This could affect the marketability of your home.
In addition, we will consider the ratio of non-owner occupied units to owner-occupied units. This could also affect future marketability since many people would prefer to live in a project which is occupied by owners rather than renters.
We will also carefully review the appraisal to insure it includes comparable sales of properties within the project, as well as some from outside the project. Our experience has found using comparable sales from both the same project as well as other projects gives us a better idea of the condominium project's marketability.
Depending on the percentage of the property's value you would like to finance, other items may also need to be reviewed.
Both a home inspection and an appraisal are designed to protect you against potential issues with your new home. Although they have totally different purposes, it makes the most sense to rely on each to help confirm you have found the perfect home.
The appraiser will make note of obvious construction problems such as termite damage, dry rot or leaking roofs or basements. Other obvious interior or exterior damage which could affect the salability of the property will also be reported.
However, appraisers are not construction experts and will not find or report items which are not obvious. They will not turn on every light switch, run every faucet or inspect the attic or mechanicals. A home inspector generally performs a detailed inspection and can educate you about possible concerns or defects with the home.
Accompany the inspector during the home inspection. This is your opportunity to gain knowledge of major systems, appliances and fixtures, learn maintenance schedules and tips, and to ask questions about the condition of the home.