THE LENDERS NEEDS

The lender is taking risk and must ascertain level of risk with available information. This financial risk is in the range of 97% to perhaps as low as 70%. Information gathered by the financial community is basically to answer the following three questions. These three questions are; prove your ability (income) to make payments monthly for stated loan amount, do you have the willingness (credit report) to make this payment and provide subject property value (appraised value), as security incase of default on the loan.

 Income

Stated amount on paycheck stub year to date for you and your co-borrower (spouse). This dollar amount is then divided by the number of months in the year. If you or your co-borrower has additional income, for example bonus, retirement, pension, etc., then a two-year average is used to calculate your average monthly income.

If either borrower is self employed or more than 25% of income is derived from rental income then, IRS 1040’s are required to add back some deductible losses and depression to arrive at a monthly income.

 Credit Report

The credit report is a book on your past history about paying your debts in a timely manor. Theory is course, "that what has happened will continue to happen". This report also includes any public records, such as personal liens for taxes, court judgments, bankruptcies, and credit report inquiries from other lenders or creditors in the past 90 days. More information is available in the section Your Credit Report .

Property Value

An independent evaluation is performed by an appraiser licensed by the state or is approved by the lender to provide fair market value. The lender needs to know if the value of the subject property is enough to secure the loan amount in case they must sell due to loan payment default.