You have chosen your mortgage lender and have gathered all your necessary information together. It is now time to apply for a mortgage.
You need to apply for a mortgage because you have finally decided to purchase a new home, but what do you need to know before you apply? What types of paperwork will be required from you by the lender? What type of personal history information will the lender need? How long will the loan application process take?
When you apply for a mortgage, there are several types of financial paperwork that the lender will need. A copy of last year’s taxes, a current check stub, a bank statement, and list of companies you owe money to and the amounts due are all items that may be requested. These items are used to determine your credit risk.
Some personal information that will be needed for your mortgage application is residence history. You will need to know the addresses for the places you have resided for the past few years, the length of time you were there, and whether it was a rental or owned. You will also have to account for your employment history. Lenders are looking for length in job and amount of salary to determine how much of a credit risk you are. You may be asked personal financial information such as spending habits, any recent large ticket item purchases, or whether you will be including income such as alimony or child support in your available monthly income. Lastly, the lenders may want to know what kinds of assets you have. Do you have an IRA, a car, and/or bank accounts? What types of items are available for collateral if necessary?
The mortgage application process takes approximately one to eight weeks to be approved or denied depending on the type of mortgage being applied for. Once a mortgage application is approved, it takes 7 to 10 days to fund the mortgage unless there is some contingency with the loan application. The list of closing costs should be given to you within 3 days of applying for a loan and should remain the same at closing. Make sure you review these costs closely and make sure you understand each fee.
When choosing a lender, ask what percentage of loans are denied. You should expect a percentage of less than 10 percent. Also, find out what types of mortgages your lender uses most regularly. What is the turnaround time for the mortgage application? The expectation would be that an application can be approved in a matter of hours to no more than eight weeks. Asking these questions in advance should help you to avoid “over-shopping” which means you have contacted multiple lenders for quotes. Every time a quote is given, your credit report is pulled which actually lowers your credit rating because it looks suspicious. Your credit report should not be pulled more than 2 or 3 times in a six month period to keep from adversely affecting your credit score.