Often when a mortgage lender reaches out to an applicant after the loan has been submitted, the applicant’s first response is often, ‘Oh no, what do they need?’ After all, along with the initial application there was an additional amount of documentation the lender needed in order to process the loan. But in most instances when a lender has a question, it’s rather simple. Typically it’s nothing more than tidying up the application in order to meet guidelines for the selected loan. Here are some common questions lenders have when reviewing your application along with standard answers that are helpful.
Common Lender Questions: Answered
Have you been known by any other name? This lender question will invariably pop up when variants of the same name appear in a credit report. This especially applies to those who have taken on a spouse’s surname after marriage. Or, more popular names that have variants such as Robert v Bob or James v Jim will also trigger a lender question. Each time over the years that someone applies for credit, whatever name appears on the credit report will be listed in the credit agency’s database. The answer to this lender question, simply answer, “My legal name is Sally Jo Smith but took on my husband’s name after marriage. I’m now known as Sally Jo Doe.”
There is a deposit in your bank account that doesn’t match up with your paycheck stubs. Can you tell us where this deposit came from? This is another common lender question. Let’s say someone gets paid on the 1st and 15th. Paycheck stubs will verify these amounts. If another deposit shows up on the 10th that can’t be sourced and the funds will be used to help with closing costs, then an explanation letter will be needed. The answer? Those funds are a financial gift from my parents. I have documentation from my parents to my bank account. Or, if the funds are not a gift, simply explain where they came from and provide documentation. Lenders want to make sure additional funds are not a personal loan that could affect debt ratios.
Can you explain the late payment on your automobile loan? This lender question can rattle someone thinking the loan application is about to be turned down, but the lender is simply complying with loan guidelines. A recent late payment is really rather innocuous but late payments logged in a credit report must typically be accompanied by an explanation from you. The answer? I really don’t recall why that payment is showing as late. I’ve always made my payments on time but it’s certainly possible one could slip by.”Again, this is simply following program requirements and isn’t a ‘make or break’ lender question. If however there are multiple late payments showing up over the past couple of years, that might result in more investigation.
There’s a gap in employment for a couple of months, why were you unemployed? One of the things lenders need to verify is a minimum two-year history of employment. Employment history can be verified by several methods with the most common being the last two years of W2 forms. The year-over-year income must be relatively consistent and match up with he year-to-date income showing up on income tax returns, or for the self-employed, two years of tax returns along with recent business and personal bank statements. When faced with this lender question, an acceptable answer might be, “I took two months off in order to help my parents. Or, My company temporarily laid off staff due to a change in ownership during that period.”
Do you make/receive support payments? This lender question is triggered when there are some dependents showing up on an application for someone who has indicated there has been a divorce or separation. Support payments won’t show up on a credit report. The amounts and who has to pay is listed in the divorce decree. If divorced or separated and there are dependents involved, most often one party is legally responsible for making support payments, up until the dependent reaches the age of 18.
There can be other variants but this is common. If receiving support payments and the income is needed to help qualify, the lender will want to know not only how many more years the payments will be made but the payments have also been kept current with no late pays. If the payments will expire in say a year or two, the income cannot be used. Answer? Yes, I am required to pay child support, or Yes, I receive support payments.
When these and other lender questions come in, let’s talk about them and I’ll help craft an answer for you based upon your situation. Again, these post-submission questions are usually nothing more than complying with loan program guidelines.