Robert Nusgart: Get prepared to make loan qualifying easier

The real estate spring market is underway and you are finally thinking of purchasing a new home.

The fun part is going out and looking at homes and envisioning your family settling into a beautiful new house with a rolling backyard, and a fresh kitchen with stainless steel appliances and granite countertops and first-floor master bedroom suite.

But then reality sets in and you wonder: “Can I afford this? How much can I borrow?”

Panic may set in. Then fiscal paralysis. Followed by the abandonment of your dream.

OK, maybe not that dramatic. But it is all too common nowadays that buyers, who may be enjoying the best purchase market in decades, still think first with their heart and then their head.

Although it may sound self-serving, never start hunting for a home before you know what you can afford, and get an idea from your loan officer about how you will be underwritten once a file is submitted.

So there are some things to look at before you start your search for a loan officer.

First, start gathering documents because the loan officer is going to want to see those right at the beginning. Here’s the quick list:

-W2s from 2010 and 2011 and your federal tax returns with all pages and schedules — not just the first two pages of your 1040. If you own a business, have those ready as well.

-Get your last two most recent paystubs. An acceptable paystub will show your regular pay, overtime and most importantly your year-to-date pay.

-Collect your two most recent bank/brokerage/retirement accounts. Examine these documents and make sure that your name, address and full account numbers are on the accounts. Sometimes borrowers will just print out their most recent “run” of their account off of the bank’s Internet site, and usually that will not contain most identifying information.

In addition, when you look at your bank statements, if there are any large non-payroll deposits contained in those statements, underwriting will want to know where the money came from and to show relevant documentation. Also, if you plan on using retirement savings for a down payment, you will need to gather information from the account on how you can liquidate those funds.

-You will need to give a copy of your driver’s license.

That should be a good starter set for any loan officer, in addition to giving them permission to obtain a fresh credit report that will also give them an idea of your credit history and credit worthiness.

When a loan officer has these items, he/she can determine if a government-insured FHA loan or a Fannie Mae/Freddie Mac conventional loan is in your best interest. Also, the loan officer should be able to tell within a few minutes of looking at the credit report if certain letters of explanation will be required by underwriting.

Then of course there are other issues that may come up in conversation, such as:

-If you are getting a divorce or being separated, you will need to show the divorce decree or separation agreement that spells out the terms of alimony or child support. This will influence your qualifying.

-If you plan on keeping your current home, then you will need to show the current mortgage statement, which will then verify if taxes and insurance are a part of the overall payment.

-If you are getting a gift for the down payment, there typically is a lender-specific letter that needs to be signed as well as documentation of who is giving the gift, their ability to give the gift and then a “follow the money” from donor to recipient trail that has to be submitted.

The bottom line is that an hour spent with a loan officer, who will qualify and educate you, will pay off with a much more confident and relaxing time spent with your Realtor when searching for that new home.

Robert Nusgart is a loan officer with Mortgage Master Inc., which is associated with The Strata Group in Baltimore. He can be reached at 443-632-0858 or by email at [email protected]. Visit his website at www.RobertNusgart.com for the latest mortgage and financial news.