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Data needed to qualify for a loan

This is the information you'll need to supply when you're ready to apply for a loan to finance your house. The explanations of the terms were supplied by J. Michael Fernandez of ICM Mortgage Corp. in Tampa.

Income

Income. Monthly gross income: salary, base pay (self-employed, commissions, bonuses and overtime should be established for two years or longer in order to be counted as qualifying income).

Other income. Child support, alimony, interest income, net rental income should be established for two years or longer.

Monthly payment

P&I. The portion of the total monthly payment that is applied to principal reduction and interest.

Taxes. The portion of the total monthly payment that is applied to pay the real estate property taxes.

Insurance. The portion of the total monthly payment that is applied to pay for the hazard insurance on the home.

PMI. The portion of the total monthly payment that is applied to pay for private mortgage insurance or mortgage insurance premium (MIP), which is needed on conventional loans when the borrower puts less than 20 percent down; required on all FHA loans.

HOA. The portion of the monthly payment that is applied to pay the homeowners association maintenance fees if the home is in a community that requires a mandatory homeowners association fee.

Debts. Monthly payments on existing auto loans, installment loans, credit cards, alimony, child support, etc.

Total payment ratio. The total monthly payment divided by the total gross monthly income should not exceed 28 percent for a conventional loan and 29 percent for an FHA loan.

Total monthly obligation. Total monthly payment plus debts.

Total monthly obligation ratio. Total monthly obligation divided by total monthly gross income should not exceed 36 percent for a conventional loan and 41 percent for an FHA or VA loan.

Cash required

for closing

Down payment. Amount of money needed to make required down payment.

Closing costs. Amount of money needed to pay for buyer's portion of closing costs, if any.

Discount points. Each point is 1 percent of the mortgage amount charged to increase the interest rate yield to the investor.

Prepaids. The amount of money needed to pay prepaids (14 months of hazard insurance and flood insurance, four months of real estate property taxes, two months of private mortgage insurance or mortgage insurance premium if required, interest on the mortgage for the remaining days left in the month the loan closes).

PMI. Amount of money needed if private mortgage insurance or monthly mortgage insurance premium is required; 12 months of coverage must be paid in advance.

Cushion. Amount of money needed in reserve to cover two months of the total monthly payment for conventional loans only.

Cash available

Earnest check. Money given as a deposit at time of contract.

VOD. Stands for verification of deposit. Amount of money on deposit in checking, savings, certificate of deposits, etc.

Gift. The part of down payment coming from a gift of a relative or longtime friend that is not to be repaid.

Source of funds if not in bank. Where the remainder of the money needed to pay for down payment, closing costs and prepaids is coming from if not deposited in bank account.

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