HOW IT ALL FITS

Written by Justin Neil Gaynor

When it comes to financing a home using a mortgage, you want to have as many of your ducks in a row as possible. More importantly, you want to understand how it all fits together. There are many variables that are considered by lending institutions when they are evaluating an application for a mortgage. Unfortunately, this is not the stuff they typically teach you in high school, though here in Florida, Governor Ron DeSantis is making some real headway in getting this type of practical math integrated into public school curriculums.

The general idea is that the lender wants to make sure that the borrower has the capacity to make the monthly payments associated with the loan well into the forseeable future and ultimately through to completion. Now, most people that buy a primary residence in America will sell that property and move within approximately 13 years, so that is taken into account by the lenders as well. Still, there are a variety of factors that help to determine whether you are a good risk to take in lending their money. However, it is not just a yes or no answer. The interest rate they are willing to lend the money to you at is determined by how safe, or risky, they feel it is to lend you money.

The types of things they will consider is how much money you have flowing in each month, the consistency of the money flowing in, where the money is coming from. The lender will want to know how well you have been paying your bills in a timely manner, if you have a habit of borrowing close to your limits, or if you only borrow small amounts of money compared to the overall credit you have available to you. They will want to know what your monthly cash outflows look like in relation to the inflows. All of these things will have to be documented as well. That is why it is good to wisely and proactively manage these various aspects of your financial life on a regular basis, but especially in the two years or so leading up to the point when you are ready to purchase a home.

Some of the documentation that you will need to round up includes, but is not limited to:

• Some form of ID (Driver’s License, State Issued ID, Passport)

• Past two (2) years W-2 statements

• Pay stubs covering the last (30) thirty days

• Three most recent monthly bank statements

• Most recent transaction summary of 401K, IRA, or Mutual Fund Accounts

• Photocopies of any stocks or certificates of deposits

• Copy of the purchase and sale agreement of the new property

• If you are currently renting....either 12 months canceled rent checks or the name and address of your current landlord

• If divorced...a fully executed divorce decree

• For a refinance...a copy of the deed, and most recent tax bill

• A letter of explanation for any known credit problems

• For self employed borrowers, employed in sales, paid by commission, or owns rental real estate:

• Two (2) years signed personal tax returns - including all schedules

• If self-employed through a corporation, last two years corporate returns as well as a year-to-date profit and loss statement and balance sheet

Of course, each lender is different, some requiring more, or less, documentation. Just remember that the less documentation you have or they require, the more risk they are taking as a lender, and thus the higher the interest rate you will likely be paying for the loan.

Gentlemen, you have to build and manage your financial life in the same way you would build a quality home. Doing it right, and doing it right the first time, will benefit you, your wife, your family, and your community for the entirety of your life. It is that important.

That being said. We all know that the world, the devil, and our own evil inclinations can make a real mess of our financial situation. If that is where you find yourself, the best thing you can do is to make a sober evaluation of the situation, employ the eyes and wisdom of someone you know and trust, and start making moves that will repair the situation and get your house in good order. This kind of repentance and healing is important for every man, but especially for the Christian man.