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Sample Loan Worksheet Step
1: Income Right Click in this frame of the web page to print this information. The chart below will allow you to show your income for the most current full year and the previous full year. Loan underwriters will want to look at your income over a two-year period, so be certain to supply all requested information.
Two-Year Average ________ ________ Combined Total ________ ------------------------------------------------------------ QUESTIONS: Do you expect to receive "bonus" income in the future? Yes _____. No _____. Do you expect to receive "overtime" income in the future? Yes _____. No _____. Will "other" income continue at current levels? Yes _____. No _____. If you own your home and use it as a prime residence, what is the estimated fair market value? $ ___________. What is the value of all financing now secured by your home? $____________. IMPORTANT POINTS: *You do NOT need a co-borrower to apply for a mortgage. However, the additional income represented by a co-borrower may allow you to obtain a bigger mortgage. **If you own rental property, lenders will generally add back the depreciation deducted each year on such "improvements" such as a house, but not stoves, clothes washers, etc. ***You are NOT required to disclose alimony, child support payments or separate maintenance to a lender. However, disclosure of the additional income represented by such payments may allow you to borrow a larger amount. ***************************************************************** STEP 2: DEBTSThe following chart will allow you to itemize current debts. Keep this information updated and available for lenders. (Note that by "monthly payment" lenders mean the minimum amount you are REQUIRED to pay each month. For instance, if you owe $800 on a credit card and pay $50 per month, that's fine. If the minimum required payment is $25, then write "$25" on the chart in the second column.) Current Monthly Account Debt Balance Payment Creditor Number Car Loan #1 _______ _______ ________ _______ Car Loan #2 _______ _______ ________ _______ Student Loan 1 _______ _______ ________ _______ Student Loan #2 _______ _______ ________ _______ Credit Card #1 _______ _______ ________ _______ Credit Card #2 _______ _______ ________ _______ Credit Card #3 _______ _______ ________ _______ Credit Card #4 _______ _______ ________ _______ Credit Card #5 _______ _______ ________ _______ Credit Card #6 _______ _______ ________ _______ Credit Card #7 _______ _______ ________ _______ Credit Card #8 _______ _______ ________ _______ Credit Card #9 _______ _______ ________ _______ Credit Card #10 _______ _______ ________ _______ Judgments _______ _______ ________ _______ Liens _______ _______ ________ _______ Alimony _______ _______ ________ _______ Child Support _______ _______ ________ _______ Separate Maintenance _______ _______ ________ _______ Home Mortgage _______ _______ ________ _______ Home Equity Loan _______ _______ ________ _______ Second Home _______ _______ ________ _______ Other Debt _______ _______ ________ _______ Total _______ _______ ************************************************************ STEP 3: RELATED INFORMATION What is your current or projected cost for property taxes this year? $__________. What is your current or projected cost for fire, theft and liability insurance this year? $_________. What is your current or projected cost for condominium fees? $__________. (Note: Borrowing projections are not available for those purchasing cooperative units because the co-op fee often includes the expense of an underlying mortgage.) What are your projected closing costs for such items as points, fees, a termite inspection, transfer taxes, reserves to be held by the lender, and other expenses? List the net amount; that is, total costs less any contributions from a seller, builder or broker. $_________. ************************************************************ STEP 4: WORKING THE NUMBERS When making an FHA mortgage, lenders typically (though not always) qualify would-be borrowers on the following basis: up to 29 percent of your gross income can be used to cover mortgage principal and interest, insurance, and taxes. If you buy or refinance a condo, fees are generally deducted from the amount available each month for basic housing costs. That is, if you can spend $800 a month for principal, interest, taxes and insurance (PITI) and you also have a $100 a month condo fee, lenders will generally allow only $700 when calculating how much you can afford to pay for PITI. A. What is your combined gross income from Step 1. $ __________ B: What is 25 percent of your average rental income over two years (if any) as shown in Step 1? _________ C: Subtract B from A: $ _______. D. What is your real estate depreciation over two years (if any) as shown in Step 1? $ ___________. E. Add C plus D. $_____________. F. Multiply the figure on line E by 29 percent: ________. G. Add your annual property bill, your annual insurance premium, and your annual condominium fee (if any): $_______. H. Subtract G from F: $_______. I. Divide H by 12: $__________. Item I is the amount most lender guidelines will allow you to spend for monthly housing costs; that is, principal, interest, taxes and insurance. HOW MUCH CAN YOU BORROW? Suppose Item I is $650 and suppose also that interest rates today are at 9.125 percent (9 1/8th) ®MDNM¯WITHOUT POINTS®MD-BO¯. Look at the chart below and find the interest factor for 9.125 percent. Take the interest factor (8.136) and divide it into Item I ($650). The answer is 79.89. Multiply by $1,000. The result, in approximate terms, is that up to $79,890 can be borrowed, IF YOU DO NOT HAVE AN EXCESSIVE AMOUNT OF DEBT. Unfortunately, most us do have debts. Go back to Step 2 (column two). J. What is your MONTHLY debt expense as shown in Step 2? $__________. K. Multiply J by 12. $_______ L. Combine J plus F. $________. M. Divide L by 41. $________ N. Multiply M by 100. $__________ O. If N is less than E then debts should not be a problem. If N is more than E, then a lender is likely to reduce the amount you can borrow. With regard to debt, be aware that SOME lenders may not count the monthly cost of a loan with a few payments left. SOME lenders will count the monthly cost of a debt that has just been paid off if the debt can be easily increased again, such as a credit card obligation. Note that the FHA has a somewhat higher front ratio when compared with conventional financing (29 percent versus 28 percent) and a higher back ratio (41 percent again versus 36 percent). These ratios mean that an individual with a given income can borrow more with an FHA mortgage than with conventional financing, if he or she is qualified. HOW TO PREPARE Here are 11 important strategies to make the lending process easier. First, before speaking to any lender, check your credit report. A substantial inaccuracy can scuttle your chances for a good loan, so straighten out credit problems up front. Second, shop around. Commercial banks, savings and loan associations, credit unions, mortgage bankers, mortgage brokers, and insurance companies all want your business. Make certain you speak to as many loan sources as possible (10 to 20 calls are not unreasonable) before making a commitment. Third, don't let the paperwork get you down. Lenders need lots and lots of paperwork to support mortgage decisions. Your job is to help them, so make certain you have the following items available when you first apply for a loan. ___ The full and final sale contract, including all amendments. ___ A receipt for your deposit. (Many lenders will also want a copy of the canceled deposit check when it becomes available.) ___ Pay stubs for the last 30 days if you are employed as well as W-2 Forms for the past two years. ___ Tax returns for the past three years if you are self-employed. Also, a year-to-date profit-and-loss statement and current balance sheet. ___ Bank statements for the last three months. ___ A list of all debts, including total amounts, monthly payments, and account numbers. ___ A list of all stocks and bonds, with values to date. ___ If you rent, canceled rent checks from the past 12 months. ___ The final settlement, if divorced. ___ An irrevocable gift letter if you are receiving a gift. ___ A K-1 form for the past two years if you have a partnership interest and a Form 1120 if you own a corporation or have a significant interest in one (say 20 percent or more). ___ If you are selling a current home, provide the final sales agreement or a copy of the listing. ___ Information about your current mortgage including monthly payments and the loan balance. Fourth, be wary of unreasonable rate quotes. Jules Verne created great fiction and so do many loan officers. The rate quotes you receive are only valid if they can be confirmed with a lock-in for BOTH rates and points that does not contain a weasel clause. Fifth, if you are refinancing, speak with your current lender. They may have a great desire to keep you as a client, especially if you have a solid payment history. Sixth, if a real estate broker offers a loan, check to assure that all rates and terms are fully competitive. Seventh, compare loans on the basis of the APR, or annual percentage rate. This is as close as you can get to a true interest rate. Eighth, avoid instant mortgage programs. No one needs a mortgage in 15 minutes, so why pay a premium rate for such "convenience?" Note that a premium rate can mean excess interest costs totaling thousands of dollars over the life of a loan. Ninth, no matter what loan officers may tell you, oral commitments are worthless. Be certain that all promises are written in simple, clear language. Ask an attorney to help if you have any concerns. Tenth, check out the mortgage market before you start looking for a new home. Many lenders will pre-qualify you without charge before you go house hunting, a good way to find out what you can afford and also to strengthen your bargaining position. Eleventh, remember that the material in this file may be dated or not applicable because of state and local regulations, changes in IRS rules, and for other reasons. BEFORE you act, speak with an attorney, CPA, real estate broker, loan officer and other professionals as required.
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