The Application Process
Once you've settled on a lender and have a price it's time to apply for a mortgage. Most lenders require the following information:- The names of your employers for the past two years
- Account numbers for all your accounts, including savings, checking, IRAs and brokerage
- Assets, such as personal property, other real estate holdings, and life insurance policies
- List of debts
You also need to provide a stack of paperwork:- Tax returns from the previous two years
- Copies of recent paycheck stubs (if you're self-employed, ask your lender what documentation of income is acceptable)
- Proof of one year of rental or mortgage payments
- Statements of debts and liabilities
- Gift letter for any money that family or friends plan to give you toward the down payment.
- Copy of the purchase sales contract, if available
- The lot and block number, address and other information about the property
Your lender will ask for authorization to check your employment, income and credit history. Then you'll fill out whatever paperwork the government requires, usually forms that mirror the paperwork you've already provided. Most banks charge an application fee; ask about this up front. You should also request a Good Faith Estimate of closing costs. Banks are required by law to provide this within three days of your application submission.
The Final Check
During the next five to eight weeks, you'll receive a lot of information in the mail. The first will likely be your Good Faith Estimate, followed by any government-mandated disclosures, detailed descriptions of loan terms, a list of your legal rights and obligations, and a description of the loan process. Review all paperwork carefully.
Your lender will be busy verifying all the information you provided in your application. This is called the verification or appraisal. Be prepared with copies of settlement agreements you made with creditors and explanations for any potential trouble spots. When this arduous process is complete, ask for a copy of the final appraisal.
Prepare for the Close
Along the way to final approval, the lender will run a title check to determine that the seller does, in fact, have sole possession of the property. You probably will be charged a fee for the title search and title insurance. The bank will also set up private mortgage insurance, if it is required, hazard insurance, and an escrow account for paying those insurance fees and taxes.
When the lender has completed this stage, your application will be sent to an underwriter for inspection. Underwriting is a somewhat complicated process that uses qualifying ratios to determine, once again, that you can, in fact, repay the loan. The underwriter will look again at the total costs associated with buying this home and compare that figure to your existing monthly obligations.
If you make it past that checkpoint, take a deep breath. It's time to prepare for the closing. Use the week or two before closing to double check all supporting documentation. Any errors will delay your ascent to home ownership. |
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