How to Write a Letter Requesting a Mortgage Loan

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If you're thinking of buying a house you may need to know how to write a letter requesting a mortgage loan. Write a letter requesting a mortgage loan with help from a real estate and mortgage professional in this free video clip.

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Video Transcript

Hello, this is Sidney Potter from Pasadena, California with Potter Equities. Thanks for your time. I've been asked to comment on how to write a letter when requesting a mortgage loan. Makes sense, a lot of things that we do today and it's certainly applicable probably to yourself. There's a couple very important things to know. When you do a letter you're typically going to speak to your loan officer or mortgage broker and attach a letter which I'm going to give you a few points and tips on what to put in your letter in terms of content. Now what you'll attach it to is what's known as a 1003 loan application. A 1003 is a form number for Fannie Mae. You've all probably filled out an application a 1003 when purchasing a home and it's very likely that you may or may not have completed it or attached a letter to it. It's a good idea. It sounds a bit old fashioned actually but everything in todays environment, 2011, 2012 will certainly help the consumer. Now, things that you'll want to put in a letter are things that banks want to hear and these are what they're typically interested in. They want to know that you're a trustworthy candidate for a loan application. They want to know that you're in fact a good risk. I know that sounds like an oxymoron, that you have good risk but it actually makes kind of sense. They want to know your credit capacity and most importantly they'll want to know about your job stability. In the mortgage industry that's what we call the three Cs which is collateral, capacity and credit. If you can manage to get all three of those items in your mortgage letter, then that's going to give you a head start, especially when the underwriter takes a look at it. In fact, all the above is what I call the kiss rule. The kiss rule for me is keep it simple Sidney. The kiss rule for yourself would probably be keep it short and sweet and that's when you're putting the loan letter application together. Now here's what you should highlight in the letter. If you've had credit scratches, a scratch and dent type of situation in terms of your background, highlight that and show how you've rehabilitated yourself in terms of credit worthiness. It's also ideal to highlight your job stability that you've been with a firm for so many years, etc. in employment. If you are anticipating a move and you're moving into a different neighborhood, espouse or at least point out the reasons why you're moving into that neighborhood and you are certainly looking forward to it. These are what they call story loans and we're going to get into that a little bit later. A story loan goes just beyond the numbers but actually tells when, woo, hi and why you want to do this particular mortgage loan and why you're requesting this money. If it happens to be at least in connection with a mortgage request, a HELOC and we call a HELOC a Home Equity Line of Credit, you'll want to go into some minutias, some detail as to why you're looking for that extension of credit. Maybe you're rehabilitating the home or doing a rehab, maybe you're sending little Johnny to a college and you'd like to get some of that college tuition money or perhaps you're looking to build a reserve. So it certainly makes sense to recite some of those elements in that letter and lastly in terms of mortgage letters today they usually consist of what we call an LOE. An LOE is a letter of explanation. A letter of explanation usually is originated by the underwriter. The underwriter will ask very specific things to bring clarity. Now instead of being concerned about a letter of explanation as if it's a type of disciplinary hearing, it's actually an opportunity for you as a consumer, the loan application to shine. That may as you as we see some late pays here, is there a reasonable explanation. We see some recent credit inquiries on your credit report, can you please bring some clarity to that, we see here maybe some job stability issues where you've moved to a different opportunity but you have a higher pay, can you tell us why you've done that. Once again, not good opportunity to act defensive, but rather go on the offensive and take the opportunity to shine and lastly and I tell all my clients this, it's the opportunity or rather it's a rule of thumb in working with banks to show integrity, that you're a trustworthy risk and that you have the means in which to pay back the mortgage debt. Typically today mortgage bankers are very conservative especially in this environment, 2011, 2012 and if you can use that as a rule of thumb in terms of being trustworthy and showing some ethics and being just to the facts man, that will go a long way. With that, this is Sidney Potter. I thank you for your time and as I recommend to everyone, I'll see you at the finish line. Thank you.


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