Shopping Tips for a Mortgage Loan

Avoiding the 20 Percent Down payment Guidelines

Although lender guidelines recommend minimum down payments of at least 20 percent, you can avoid this often-difficult requirement. If you ask, “How can avoid this guideline? I don’t have 20 percent cash to put down.” Here’s how.

  • If you’re qualified, examine Department of Veterans Affairs (VA) loans.

    VA loans often require “zero down payments” for qualified active duty or retired military veterans. This includes many National Guard and/or Reserve members.

  • Investigate US Department of Agriculture (USDA) mortgage loans.

    USDA also offers “zero down” loans, depending on your target home’s location. Most eligible areas for these mortgages are rural, although some eligible areas, include suburbs.

  • Evaluate Federal Housing Administration (FHA) mortgage loans with downpayments as low as 3.5 percent.

    FHA loans are popular because of these rules. Be aware that you’ll be responsible for paying monthly mortgage insurance premiums in addition to principal and interest.

Mortgage Shopping Tips

Here are some additional tips when you are shopping for the “best” mortgage loan for you.

  • If your credit problems have dragged down your credit score, look closely at FHA loans.

    As the original non-conforming lender, FHA has mortgage loans available for borrowers with less than perfect credit. If your score is 580 or higher you’re qualified for a 3.5 percent downpayment. Should your credit score be 500 to 579, which is typically in the “poor” range, you’ll have a 10 percent downpayment requirement.

  • Keep some hard-earned savings in an emergency reserve.

    Since most lenders want you to have some reserve funds, instead of using every available penny on downpayments and closing costs, you’re wise to keep some funds in reserve. Lenders realize this could be taxing on your living standards, but you – and they – will “sleep better” if you have some reserve cash.

  • Compare at least three top mortgage lender offerings (on apples-to-apples bases) for the best deals when shopping.

    Call a minimum of three well-respected mortgage lenders to learn their current rates and terms. Some lenders may be “hungry” for new mortgage loans and offering below-market interest rates and terms, just when you need them. Be sure to tell lenders the same information regarding your credit, gross monthly income, LTV, and mortgage term (30 or 15 years) you want, so you’ll receive useful information. Unlike shopping for credit cards, you will want to finally settle on one lender for mortgage financing.

  • Do your homework.

    Estimate your mortgage payment before you shop for home loans. You’ll make lenders more comfortable with you, if you already have a relative idea of what you can afford for a mortgage amount and monthly payment. For example, adjustable rate mortgages (ARMs) are tempting with their low start rates, but can you still afford the payment if the start interest rate increases to its maximum (typically, a max six percent increase) if market rates creep or accelerate quickly higher.

  • Estimate the two primary debt ratios (housing and total debt) used by most lenders.

    Your housing ratio (monthly payments and other required costs) should be around 28 percent, while your total debt ratio (all monthly obligations, including your new mortgage payment) should be around 36 percent. Your housing cost and total debt are divided by your gross (not net) monthly income to calculate these ratios.


When shopping for a mortgage, be sure to check with, at least three lenders for their current terms. Become knowledgeable about the mortgage process, the other major factors involved, and only search for a loan you can afford to repay. If you’re a military veteran, consider VA loans, but not all lenders offer them. For USDA Mortgages in San Antonio consider Alanna Truitt with Gold Financial. Alanna and Gold are very well versed in this type of loan.

© William A. Pirraglia

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Documents Needed to Submit a “Complete” Mortgage Application

Locate These Documents BEFORE You Make a Mortgage Application

You need to submit a complete application before you can expect a formal approval decision. Here is a suggested checklist for you to assemble the documents you need to submit a complete application to your mortgage lender.

  • Two years’ W-2 forms if you are an employee

  • Profit and Loss statements or 1099 forms, if you are self employed

  • Two, three or four recent paycheck stubs

  • Your most recent tax return or the past two years’ returns

  • A total list of your debts, required monthly payments, and loan or child support payments, with current balances

  • A list of your assets, with bank and investment statements, other real estate owned, automobile descriptions and values, and records of other investments, or assets.

  • Copies of canceled checks for your last 12 months’ mortgage or rent payments.

Explanation of Some Individual Necessary Documents

  • Self-employed borrowers should submit a profit & loss statement for the current year, if the year is more than one-half over. Since there are few stated income loans since the housing crisis, self-employed applicants should plan on verifying their income.

  • Paycheck stubs should cover your last month’s income to verify your monthly gross income. This means you need the last two stubs if you’re paid bi-weekly or your last four (maybe five) stubs, if you’re paid weekly. Just remember, you need to verify at least one month’s income, however you earn income.

  • Tax returns are required for self-employed applicants and you are required to sign IRS Form 4506, which gives the lender your permission to get a copy of the return you filed. While this action formerly was a lender option

  • Listing your debts allows your lender to verify your debts, which should be close to those listed on your three-bureau credit report, commonly called a “tri-merge.” Having this information permits your lender to accurately calculate your housing and total debt ratios.

  • Listing your assets, including your current and past bank statements, help lenders verify your claims of having sufficient cash to make the required downpayment, whatever it may be. Most mortgage types prohibit getting undisclosed loans or family gifts to generate enough downpayment cash to fill in gaps in your savings, although some mortgage programs allow gifts from immediate family members.

  • Canceled rent or mortgage checks can tell their own story about your payment pattern for housing obligations. Copies should have both sides of the checks so the lender can see when your bank cleared. Consistent late payments may not show on your credit report, but will show when your landlord deposited your checks.


Mortgage lenders attempt to create verified financial picture of their applicants. This is vital to successful approval decisions. Gathering and preparing these documents before you make application is critical to receiving a fast decision.

Be sure not to exaggerate your income or liquid assets as your lender will find out. When lenders have doubt, they tend to lean toward rejection, not approval, even if you have more income or assets than you originally stated. This information gathered from Alanna San Antonio Mortgage Brokers

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