Question: We are planning to begin shopping for our first home in a month or two. What kind of financial paperwork will a lender need in order to approve our loan application?
Answer: Requirements vary from one bank to the next. If you know which lender or mortgage-brokerage firm you plan to use, sit down with one of its representatives and ask to get preapproved for a loan. The rep will tell you which documents you’ll need to submit, will review them and then will determine how much you will be able to borrow.
Getting preapproved is important for two primary reasons. First, knowing the maximum amount that you can borrow will discourage you from looking at homes that you simply cannot afford. And second, the preapproval will make the offer you eventually submit for a house look stronger than a similarly priced offer from a buyer who isn’t preapproved, because the seller will know that you already have the financing lined up to close the deal quickly.
That said, you probably will be asked to provide copies of the past two income-tax returns you filed and the W-2 forms that show how much you earned. Expect to produce your most recent pay stubs as well. If you’re self-employed, you’ll likely need to provide a year-to-date profit-and-loss statement and a current balance sheet.
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The bank also will ask about your various debts. Make a list now of all of your credit cards, auto and personal loans. Write down the name and address of each creditor, the account number, the outstanding balance and the minimum monthly payment that is required.
The lender will ask about your employment history for the past several years. Be prepared to explain any lengthy gaps between jobs: Banks generally don’t mind if you took time off to have a child or go back to school, but they get nervous if a borrower spent a long time without working for no apparent reason.
You also will need to show where the cash needed for the down payment and closing costs will come from. Expect to be asked for recent statements from your checking and savings accounts, stock-brokerage accounts and the like. If your parents or someone else is giving you some or all of the down payment, they probably will be asked to sign a “gift letter” that states that the money truly is a gift rather than a loan that must be repaid.
Again, your best bet is to get pre-approved for a mortgage before you begin your house-hunting trek. Gathering all the paperwork to garner preapproval may take hours or even a few days, but the benefits of spending the time now will pay dividends later.
Real estate trivia: A report released by the rate-setting Federal Reserve Board in April said many of its members want to raise interest rates in June to curb borrowing and thus quell the threat of a long-term pickup in inflation.
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Q: What is an “easement in gross”?
A: It’s a document, often held by a utility company, that gives the firm access to your property if there’s an emergency or to perform basic maintenance.
The title to your home probably grants an easement in gross to the phone company to string wires above your yard, or to sewage officials to maintain the pipes that run from your house into the public sewer system.
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Q: Where can I get one of those new mailboxes that zap a mail-carrier’s hand when he or she tries to deliver junk mail?
A: You can’t. The so-called “Smartbox” was an elaborate April Fools’ Day prank orchestrated by Inbox, a unit of Internet giant Google. Its expensive online commercial not only touted the fictitious box’s ability to deliver a small electric shock to a carrier who tries to fill it with unwanted mail, but also boasted of its climate-controlled interior (apparently to keep incoming correspondence at a comfortable temperature) and a built-in computer screen on its side that would allow you to search the Internet and perform several other functions.
If you’re feeling a bit gullible for being fooled, don’t. Plenty of other homeowners fell for the prank, as well as another launched by online insurer Esurance, for a new type of policy called “Presurance” -- a warning system that purportedly would give you up to seven days’ notice before you get into a fender-bender or suffer some other type of mishap.
A friend of mine who manages an electronics store says he’s still getting calls from customers who are hoping to get their hands on Samsung’s made-up “Galaxy Blade,” the world’s first chef’s knife that doubles as a top-of-the-line smartphone. And susceptible homeowners are still asking Duluth Trading Co. about the retailer’s fictitious magnetic work pants: Lined with hundreds of high-powered magnets, do-it-yourselfers would simply slap their hammer and other metal tools directly onto the outside of the jeans, and thus eliminate the need for a bulky tool belt.