Banks, mortgage companies and other residential mortgage lenders generally apply the same or very similar guidelines to the mortgage approval process. These guidelines are standardized by the secondary market investors who buy mortgages, particularly the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Michael Dunsky applies these guidelines with flexibility to achieve fairness and maximize customer satisfaction.

PROPERTY

The value, condition and type of property must be verified by an appraiser and approved by the underwriter’s review. Other information about the property must be verified through documents such as the Purchase and Sale Agreement and Real Estate Tax bill.

INCOME

All sources and amounts of income must be verified by the employer or other payer. W -2′s pay stubs, tax returns and other documents are also used as verification.

ASSETS

The liquid assets needed to close, including the down payment on a purchase, closing costs, and reserves must be verified. Bank statements, deposit statements, gift letters and other written verifications are used.

CREDIT

Payment history and present expenses must be verified. A Credit Report must be obtained and reviewed for this purpose. Also, independent verification is often necessary (cancelled check status letters, letters of explanation, etc.).

If the property, assets and credit are verified and approved, a borrower will be “qualified” to borrow an amount based upon the income that is verified and predictable. The standard guideline is that the monthly housing expense cannot exceed 28% of the gross monthly income and the combined monthly housing, plus debt payments cannot exceed 36% of the gross monthly income. Shelter Mortgage has flexibility to exceed these ratio limits under certain circumstances.

Example worksheet:

1.) Gross Monthly Income (Earnings must be consistent) $__________

(Of all borrowers, which can be verified by W-2′s, pay stubs, tax returns, Etc.)

2.) 36% of Gross Monthly Income $_________

3.) Subtract Monthly Debt Payments $_________

(All loan payments and other debt payments with more than

10 months remaining, excluding current mortgage on home.)

4.) Balance Left for Housing Expense $_________

5.) 28% of Gross Monthly Income $_________

6.) Maximum Monthly Housing Expense (lesser of 4 or5) $_________

7.) Subtract Monthly Taxes, Hazard Insurance,

Private Mortgage Insurance, Condo Fees, Etc. $_________

8.) Maximum Monthly Principal and Interest $________