The mortgage application process requires considerable paperwork and can be quite frustrating even if it is not your first time through. First there is an application form that you will receive from your lender. This application form asks for information about you, your employment history, and the house you are seeking to purchase. The lender will also ask for documentation pertaining to your personal finances. Be prepared to answer questions about your earnings, monthly expenses, and your debts. The goal is to gauge your ability and willingness to repay the loan.
As part of determining your willingness to repay the loan lenders will examine your file at the credit bureau looking to see how often you made late payments on other lines of credit. A lender will reject your application if the report shows that you have a poor credit history and thus equating to a high risk loan. Always make sure your credit file is accurate before you apply for your mortgage, especially with the amount of identity theft that occurs in our current time.
To figure the monthly mortgage payment, the lender will start by asking how much you want to borrow. The maximum loan amount is determined by the value of the property and your personal financial condition. The better your credit the more you will be able to borrow. A real estate appraiser will be sent to estimate the value of your potential purchase. The appraiser's estimate is an important factor in determining whether you qualify for the size of mortgage you want. However, it is not the final decision and another reason why it is important to work with an honest and reputable mortgage company. Borrowers are generally able to obtain a certain percentage of the appraised value of the property, such as 80, 90 or even 100 percent. If the mortgage is for less than the full amount the borrower is expected make up the difference in the form of a down payment.
Remember to be prepared to provide specific documentation about your income, W2s for prior years and pay stubs will be asked for. Also, you will need to show the status of all current debts and you will need to include the account number, outstanding balance, and creditor's address for each. The time it takes to approve your loan may vary depending on complexity of your mortgage, current market conditions, and whether you have to provide any additional information. Do not be afraid to ask the lender how long the approval process will take. Don't forget, they are working for you!
If your application is turned down for any reason federal law requires the lender to tell you, in writing, the specific reasons. Make sure you understand the reasons given because you may be able to find answers or alternatives that will satisfy the institution's lending standards. However, even if that does not happen, understanding fully why the loan was denied may improve your chances with the next lender you visit.
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