- When should I start looking for a mortgage?
- What should I ask a prospective lender?
- What should it cost to get a mortgage?
- What papers do I need for a mortgage application?
- What happens once I’ve submitted a mortgage application?
Many people are surprised to learn that the best time to look for a mortgage is BEFORE you look for a house. Beginning your adventure with the search for financing gives you plenty of time to pull together records you will need to get a mortgage when you finally find the home you want to buy. It’s a big advantage to get familiar with mortgage lenders in your area in the early stages of your house hunting project. There are also two valuable things you can carry away from your visits with lenders that can help make your home search a little easier.
- Pre-QualificationPre-Qualification consists of a verbal or written statement of the maximum amount of mortgage you should be able to receive based on the financial information you’ve provided. This helps you and your real estate agent narrow your home search to houses available in your price range. There should be no charge for a Pre-Qualification.
- Pre-ApprovalA Mortgage Pre-Approval is a formal letter from your lender which indicates to a seller and his or her real estate agent that you have had your credit reviewed and are “credit worthy.” It also shows that you have been approved up to a certain loan amount.There are many benefits in having a Mortgage 1 Pre-Approval, not the least of which is that it can eliminate a great deal of potential anxiety since you do not have to wonder about your credit rating or how much of a mortgage you’re approved for.There are other benefits as well. Your offer to buy can be taken more seriously once you have finally found your dream home.
Many offers today are made with contingencies, such as mortgage qualification, the sale of another dwelling, etc. When you indicate to the seller of the home you want that you have been “pre-approved” for a mortgage, your offer becomes more attractive. The seller knows that it’s likely that a sale to you will “go through” and not result in costly and inconvenient delays.
Closing on your new house will likely be faster and easier. The pre-approval process includes some of the steps that would be taken in the regular mortgage process. Since you will have already gotten those steps out of the way, your mortgage can be closed faster.There is typically a modest charge to obtain a Mortgage Pre-Approval. This covers the cost of the lender obtaining and reviewing your credit report. To get a Mortgage 1 Pre-Approval, contact your home mortgage consultant.
The following are good questions to ask a mortgage lender:
- How long have you been in the mortgage business?
- About how many days will it take to get my mortgage processed?
- Would you please provide me with a written “Estimate” outlining closing costs and interest rates if I were to get a mortgage from your company today?
There are a number of costs associated with applying for and closing on a mortgage besides the house payment. To begin with, there is a fee charged by the lender to obtain a credit report and conduct a formal appraisal of the property. This can range from between $350 and $500 and is typically due when you apply for the home loan.
In addition to this amount are closing costs. The seller will sometimes help the buyer pay some of these costs. Closing costs can (but not always) include the following:
- Origination fees
- Application fees
- Discount points (“points”)
- Appraisal fees
- Title insurance fees
- Costs for recording documents, prepayments of real estate taxes and insurance premiums held by the lender.
In order to process your mortgage, your loan consultant will need several pieces of information regarding your income, debts, and residency. You may be asked to provide other information such as the previous two years federal tax returns or specific financial documentation, particularly if you are self-employed, own rental property, or have income such as commissions and bonuses.
There’s nothing like preparation to help take some of the anxiety out of the mortgage application process. An hour or two spent “pulling together” financial information can save many days of delays down the road.
Use this Application Checklist to make sure you’ve got the necessary papers in order to ensure smooth sailing during the application process. If you have questions about whether other documentation may be required, call your real estate salesperson or mortgage consultant.
Mortgage Application Checklist
- Residence history for the previous 2 years:
– Name, address, and phone number of landlord/lender
- Employment history for the past 2 years:
– Name, address, and phone numbers of current and past employers
– Current paycheck stubs for the past 30 days
– W-2 forms for the past 2 years
- Previous 2 years of tax returns:
– If self-employed, earn commissions or bonuses, or own rental property
- Previous months of checking and savings statements:
– Bank or credit union
– Mutual fund, stock, bond, or other brokerage accounts
- Names and account numbers for ALL outstanding debts:
– Minimum monthly payments
– Current balances
- Divorce decree (if applicable)
- Information on child support/alimony payable or receivable
- Other real estate holdings:
– Name of lender, account number, address, and phone number
- Copies of all current lease/rental agreements and land contracts:
- VA applications:
– Certificate of Eligibility and a copy of discharge papers (DD-214)
There are six steps in the mortgage process:
Once the offer has been accepted on the home you are buying, you’ll fill out an application, usually in person. Within three business days of filing your application, you’ll get a Good Faith Estimate and a Truth-In-Lending-Statement which outlines the approximate costs associated with the loan.
2. Application Setup
Shortly after application, we will order a property appraisal from a certified appraiser and a credit report. If necessary we will send out Verifications of Employment to your employer, Verification of Deposits to your financial institutions, and possibly other verification forms as well.
A loan processor will review the appraiser’s report, your credit report and look over the verifications. If there are any discrepancies or questions, you’ll be asked to provide written explanation. This whole package is then presented for underwriting.
4. Mortgage Underwriting
This is the point where your loan is either approved or denied. The decision will be based on the appraisal, your credit worthiness and ability to repay the loan. You may be asked to provide more information to help with the decision.
After your loan has been approved, a loan closer will review your file and prepare it for closing.
At the closing, you’ll need to bring the original homeowners policy with a paid receipt, and a certified check to cover the down payment and closing costs.