The Mortgage Loan Process
The process for applying for a mortgage loan can be broken down into distinct steps.
- Conduct research. Comparison shopping is the most important groundwork you can do. Find out which mortgage loan program would be the best for you, what the average interest rates are in your area (they differ from place to place), how much of a mortgage you can afford (should not be more than 29% of your gross monthly income), and what your mortgage payments are likely to be. With every scenario and every different lender, obtain a Good Faith Estimate. Make sure that you try all different types of financial institutions, such as credit unions, mortgage banks, independent lenders, and so on.
- Pre-qualification/ Pre-approval. This step is crucial for those looking to buy a new home. Most good brokers will not work with a buyer unless they are pre-approved, and being pre-approved works in the buyer's favor because they are usually given precedence over other buyers. Pre-qualification is the small step before pre-approval, is usually free, and most times can be done over the internet. It is a quick assessment done by general underwriting methods, but without a credit inquiry. The pre-approval is a more in-depth assessment, where most of the application is completed and all that is left is the appraisal (if buying a house) and the final approval.
- Completion of Application. The application itself involves a huge amount of paperwork. Be prepared to bring all of the documents required of you, including but not limited to: pay stubs, tax forms including W-2's and tax returns, social security checks or proof of any other type of income, bank account numbers, account statements for the past 4 months, bank branch information, lists of stocks, bonds, and other investments, titles of vehicles that are free and clear, all and every type of bill or debt incurred (including credit cards, automobile loans, furniture loans, student loans, etc.), plus copies of any current mortgages and the purchase contract of your new home if buying.
- Approval. The approval can take anywhere from two weeks to a month and a half, depending on how timely you are in providing your loan officer with the correct documentation, and how motivated they are to see your case go through (they have many, many such cases). If you are a buyer, the appraisal for your new home is set and the house inspected. Then the loan is approved and the documents are signed, and you receive your funds usually within a week. After three days, your lender is required by law to send you an estimate of your mortgage payments, your interest rate, and your closing costs. During the whole process, make sure to keep in close contact with your loan officer.
For more information on the application form itself, please visit our loan application page.