Mortgage loans are an essential element in the home-buying process. They involve depositing money on a property, negotiating its terms with your lender and paying it back in fixed monthly payments over an extended period.
There are a few steps you can take to make your mortgage application go as smoothly as possible. First and foremost, ensure all necessary paperwork is filled out accurately so any potential hiccups in the process are avoided.
The timeline for getting a mortgage can vary, but generally takes three to five months from start to finish. During this time you’ll select your loan type, apply for credit and find a housing counselor who will guide you through the purchasing process.
Before making an offer on a house, get preapproval letters from at least one lender to confirm you’re eligible for mortgage financing. This will give you the assurance to make an aggressive offer and save time and frustration at the end of the process.
Comparing rates, fees and terms from lenders will help you decide which offers are most appealing to you. It is recommended that you select at least three mortgage lenders and complete a mortgage application with each of them.
Within three business days of receiving your mortgage application, lenders must provide you with a document known as a Loan Estimate. This estimate contains important details about your loan terms and costs, such as the interest rate and closing fees.
Maintain copies of each lender’s Letter of Offer (LE) so you can negotiate your interest rate and closing costs at a later stage in the mortgage process.
APR (annual percentage rate) is the amount of interest you’ll pay on your mortgage over its term. It’s the metric most lenders use when comparing offers, and you may see it displayed on both your credit report and mortgage payment statement. Therefore, understanding this number is essential for understanding any future mortgage decisions.
Typically, the higher your credit score, the better off you’ll be in negotiating your rate. That is because higher scores serve as a strong indication of your capacity for repaying the mortgage.
Lenders assess your financial situation by reviewing credit, income and debt to decide whether you qualify for or reject a mortgage. They want to guarantee you have the resources to repay the loan and don’t put at risk their investment in you.
To verify your employment history and other income sources such as alimony or child support, you’ll need to submit recent pay stubs, W-2 forms and tax returns from the last two years. Additionally, your employment history and other sources of income like social security payments should also be verified.
Be prepared to answer all questions and respond promptly when completing your mortgage application, as this will expedite the lending process.
When applying for a mortgage, it’s wise to have all your tax documents and pay stubs ready in case the lender requests these items in person or over the phone.
Once you select a lender and complete the application, they’ll review your documents before issuing an official decision in writing. If approved, they’ll complete all remaining paperwork to close the deal; if denied, they’ll provide written notification stating why they declined your request.