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When it comes to applying for a mortgage to buy a home, lenders are on the lookout for specific criteria. While applying and qualifying for a mortgage is not an insurmountable task, it is important that you rate high in many of the key areas or you are not likely to be approved. Let us take a look at these essential areas.

Job Stability

Lenders like to approve individuals who have held the same job for at least two years if not longer. Jumping from job to job or having holes in your job history will require explanation and is not advantageous in the eyes of a lender.

Owning a Business

If you own a business you must provide a solid history of the success of your business for a two year period. To do this you must either obtain a letter from your accountant that clearly states that you have been in business for a period of two years or else you must be able to show proof of a business license that will identify when your business got its start.

Two Year History

If you do not have a two year job history or have not been in business for two years then you can still apply for a mortgage. If you qualify in the other categories then you are not likely to run into a problem with being approved. For those who fail to meet the two year criteria there are what is known as “No Doc” loans. If you apply for one of these types of loans, your job history does not have to be disclosed or verified. The down side however is that you will pay a higher interest rate on the mortgage.

Income

The two year rule applies with income as it does with job history. The lender will need to see two years worth of W-2 forms as well as your current pay stubs. If you own a business, the lender will take a two year average of the money you have earned based on what shows on the last line of your tax return after everything else has been written off. If you earn a commission income you must be able to account for a two year history and from that the lender will take an average. If your monthly debts equal 41% or less of your gross monthly income then you should be approved for a mortgage.

Down Payment

The traditional amount required for a mortgage is 20% which will put you in good standing with the lender and help you get the best interest rates possible. However putting 5% or 10% down is still something a lender will be pleased to see.

Reserves

Reserves are money that remains in your bank account after you have paid all of your closing costs. Having one month of reserves looks well to a lender and that includes enough money to cover one mortgage payment, your property insurance and all applicable taxes. The reserves you need are dependent upon the type of mortgage you are applying for. As a general rule, having two to six months worth of reserves is considered desirable.

Credit History

Your credit history plays a significant role in whether or not you will be approved for a mortgage and well as what terms will be set down. It is your “fico” score that will be closely scrutinized by the lender and will weigh heavily into the decision of whether to approve your application or not.

Tags: mortgage | lender | credit | home | realty

A Foreclosure is a process in which the lender is allowed to sell the securing property to recover costs for a defaulted loan. In English, if you are not paying your mortgage, under certain circumstances your lender can sell your house in order to receive their money.

There are two types of Foreclosures - A Judicial and a Non-Judicial Foreclosure.

A Judicial Foreclosure results from a court action - there is no power of sale clause, and the lender has to sue the borrower to recover the unpaid balance. If the court finds the debt legitimate, and in default, it will issue a judgment for the total sum, including process expenses. Subsequently to that the court will order a public auction. The highest bid wins and the top bidder becomes the possessor of the property. Judicial Foreclosure is available in all states. <!–adsense–>

Non-Judicial Foreclosures are settled outside the court and are subject to state laws. The process is started by the lender, who sends out a Default Letter to the borrower. A NOD (Notice of Default) is sent to all parties entitled to its receipt, usually 3 months after the loan default date. If the borrower is unable to cover the amount owed, a Notice of Sale is publicly distributed. After the legally obligatory time period has expired, a public auction is held, with the highest bidder becoming the possessor of the property. Not available in all states, time-frames and procedures do differ from state to state.

The proceeds of the Foreclosure are used to recover the lender’s investment, including process expenses.

“We have seen severe investor pull-back and origination has all but dried up” said Credit Suisse Group Chief Executive Officer Brady Dougan today, supporting the layoff announcement. 170 more employees will be laid-off, following last week’s reductions in New York and London, bringing the number of terminated workers to 320. Dougan noted the he does not expect any positive movement in the global mortgage market at least for the next eighteen months, since this “problematic” sector is currently showing a rising number of loan defaults.

Tags: credit suisse | new york | london | mortgage | foreclosure

Silicon Valley Blogger posted a nice article on the million-dollar question “Should I rent or buy?”. Side-to-side comparison of your options and some good tips.

Rent vs Buy A House: How To Evaluate Your Options on The Digerati Life

Tags: rent | mortgage | digerati | homeowner

A pretty interesting article by Jonathan Clements, who gives some good advice on how to be ready to face recession: reclaim savings, downsize debt. Short tips on 401(k), Roth IR and other savings accounts; mortgage & refinancing; debt.

 Getting Going on WSJ.com

Tags: wall street journal | jonathan clements | savings | debt | cash

Newsday has published some disturbing numbers: just for the period of one year, foreclosures nationwide have jumped with the whopping 115%. Exactly 243,947 were the filings in August, hitting the highest point in a single month since foreclosure statistics were tracked by RealtyTrac starting back in 2005.

 ”The jump in foreclosure filings this month might be the beginning of the next wave of increased foreclosure activity, as a large number of subprime adjustable rate loans are beginning to reset now,” said James J. Saccacio, RealtyTrac’s chief executive.

Foreclosures in US rise 115% since last year on Newsday

Tags: foreclosure | filings | realtytrac | mortgage