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Careful preparation speeds approval

The process of getting a mortgage can try your patience and invade your privacy. The trick to making your way smoothly through the mortgage maze is simpler than you might think, though. It's all in being prepared and knowing what will be expected of you.

"We want buyers to realize that this is a partnership thing," says J. Michael Fernandez, a vice president at ICM Mortgage Corp. in Tampa. "As long as they work with us, we'll try to knock down as many hurdles as we can and get them approved quickly."

Fernandez offers these tips to home buyers warily entering the world of interest rates and discount points.

"The more prepared you come to your first meeting with the lender, the faster the process will go," Fernandez says.

The loan officer will fill out a prequalifying statement, a checklist of documents he or she needs to evaluate your financial status (see the box for the list.)

During the interview, the lender will ask you for names and addresses of credit references, banks where you maintain accounts and your past addresses (including landlord's name and address). He or she also will want to see your Social Security number, names and addresses of your employers for the past two years, verification of employment and any other sources of income, such as alimony, child support, interest. (If divorced, bring a copy of your divorce decree and separation agreement.)

"This gives us more or less a two-year history of the person," Fernandez says, "and we look for anything that might cause problems."

Remember that the application fee, which can range from $250 to $300, is usually non-refundable. It pays for a credit report and an appraisal of the house. According to Fernandez, the credit report usually costs about $50, and the appraisal runs $200 to $250.

As the lending officer goes over your financial history with you, be as forthright as you can, Fernandez says: "If you've had some credit problems in the past, it's best to let us know up front so we can work it out immediately. Don't think the bank won't find out."

Remember to mention any debts you may have co-signed; even though you may not be making the payments on those loans, you are still liable.

Obviously, the larger the down payment you can make, the smaller your monthly payments will be. Don't overlook all possible sources of cash.

"A lot of people forget that they've got cash equity in a life insurance policy or a pension plan that they can borrow against," Fernandez says, "or they can cash in stocks and bonds or other assets."

If a relative or friend has given you a sum toward your down payment, the money needs to be deposited in your account at least 60 days before you apply for the loan. You may also need to produce a verifying "gift letter" from the donor.

Applicants need to have the down payment in the bank (5 to 10 percent of the purchase price usually is required on a conventional, fixed-rate, 30-year loan),plus enough money to cover two months' mortgage payments.

"That's just because the bank wants to make sure they haven't spent their last penny to close on the house," said Bob Hagan of Custom Financial Group in Tampa.

After going through your financial history, the loan officer will work up a rough estimate of your debt-to-loan ratio; that is, simply, whether you can afford the house.

"The contract tells us who will pay for what (the seller or buyer)," Fernandez says. "Based on that, we give them a good-faith estimate of how much cash they'll need to close the transaction."

The lender also will ask you if you want to "lock in" the interest rate for your loan or let it float until a certain deadline, usually 45 or 60 days later. He or she probably will not offer any advice on whether to lock in.

"That really depends on your personal philosophy as to how the market might change," Fernandez says. If you suspect that interest rates may fall before you close on your house, you may want to wait as long as you can before locking in the rate.

Within three days after your meeting with the lender, he or she will mail you a truth-in-lending statement. This document is a final version of the proposed loan. It tells you the annual percentage rate, which is a combination of the interest rate plus the amount of your mortgage plus your closing costs. This percentage likely will be slightly higher than the current interest rate.

Then you wait, while the bank spends a few weeks checking all your documentation.

"If it's a conventional loan with 10 percent down, generally we can work that within three weeks," Fernandez says. "For FHA, it's longer _ you're looking at anywhere from three to four weeks _ and with VA loans it takes about a month just to get the appraisal back, so that could take as long as five weeks."

Finally you will get the long-awaited phone call from a loan officer: Your mortgage has been approved.