Meeting with a mortgage lender can be stressful -- especially if you don't know what questions you'll be asked. While it may seem like a lender is trying to pry into your personal life, they are only asking the questions in order to make sure you'll be able to make your mortgage payment if you're approved.
So, what should you expect?
First, there's the obvious questions.
A lender is going to ask you about your income. It's best if you've been at your current job for over two years. And, if that's the case, they'll want to see at least two recent pay stubs. Your lender may also request to see tax returns from the previous year -- especially if you're self-employed or are a contract worker.
Expect to be asked about any additional income. For example, if you receive child support, Social Security payments, or any other money that comes in monthly, bring documented proof of it -- because it all counts as income.
A lender is also going to ask about the debts you have. Expect to talk about your car payments, student loans, etc.
Remember, lenders are looking for a debt-to-income ratio that's lower than 36%. So, as long as all of your debts (including the new mortgage that you're applying for) make up less than 36% of your annual gross income (what you make before taxes), you're likely to get approved.
A lender is also likely to ask about your assets. They want to know how much money you have in the bank, and how much will be left after you make the initial down payment on a home. If someone has given you the money for your down payment, they may also require a special gift letter, to make sure that everything is legally on the up-and-up.
Then, of course, they'll want to know all about the property you intend to buy.
Will it be your primary residence or an additional property? Is the loan for a new mortgage? Or, are you refinancing an existing one? The answers to these questions will help them determine if you are suited for a loan.
You may also get asked questions that go beyond these basics.
For example, a lender not only CAN ask about your ethnicity, but WILL ask that question! In fact, the Department of Housing and Urban Development makes lenders ask this question so that they can keep tabs on who banks approve and deny for loans. It's designed to make sure that minorities aren't discriminated against when it comes to mortgage approvals.
Banks are also allowed to ask if you're divorced. If the answer is yes, and you have children, that means you likely receive or make monthly child support payments. They'll need to know about that money when it comes time to calculate your income and expenses.
Questions about current lawsuits are also fair game. After all, attorney and court fees can add up fast!
So, what CAN'T they ask you?
While they can ask if you're married and if you have kids, they can't ask if you're planning on expanding your family. That’s because government officials found that lenders used this question to discriminate against female borrowers. Some banks assumed if a woman was going to become pregnant, she was likely to quit her job, which would affect the family's income level. Lawmakers said that's discrimination, and protected borrowers from this question by making it illegal to ask, thanks to the Equal Credit Opportunity Act.
Also, a lender is not allowed to ask about your health. In fact, the Fair Housing Act and the Americans with Disabilities Act state that it's illegal to discriminate against ill or disabled people. So, a lender cannot ask you if you had/have any injuries or illnesses, nor can they ask about any related medical bills.
Bottom line -- as long as you know what's allowed and what isn't, you'll feel a whole lot more confident heading into your meeting!
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