Before you do a full application, or even start your search for a new home, you might consider getting prequalified. Prequalification isn’t binding and it gives you a ballpark idea of what you can afford. The lender analyzes your income, debt and credit history, and what resources you have available to bring in as a downpayment. This will give you a good estimate of the maximum home prices you should be looking at and what sort of options you have.
Preapproval is when you get a commitment from a specific lender stating how much you can borrow. It is not necessary, but it can be a helpful step. It allows you to take that commitment to the seller of your dream home when you want to make an offer. Because the seller may treat you as the proverbial bird in hand, you may even get a better price. If your market is hot and a bidding war is likely, then Pre-Approval probably be strongly recommended by your real estate agent.
Full Residential Loan Application:
Complete the Uniform Residential Loan application or its equivalent. You can do this on your own, but we recommend completing it with the help of your Loan Advisor. This is where you will lock in your loan amount and rate. This is what will be submitted to the underwriters for final approval and funding of your mortgage.
Gather your financial documents and important information.
There is a lot of information that may be required when you apply for a loan. It is always better to have that information together from the beginning than to find out it is more difficult to obtain than you thought when your closing deadline is approaching.
The following is a common, but not exhaustive, list of things that are asked for:
- Copy of two recent pay stubs the two most recent W2s
- (If you are self employed, you need two years of tax returns and a YTD profit and loss statement)
- Provide a copy of your current mortgage statement
- Verification of any additional income
- A copy of your homeowner’s insurance policy
- A copy of your deed ##Current loan provider
- For a home equity loan, provide a copy of the note on your first mortgage.
- Title information
- Tax verification information Previous property assessments, if applicable
- If you own any rental property, provide copies of the rental agreements and two years of tax returns
- Letter from employer stating date of hire, position, salary and year-to-date earnings
- Current value of your house
- Outstanding loan amounts
- Three months bank statements for each bank, IRA/401K, stock and mutual fund account.
- Co-borrower information
- Provide a copy of divorce decree if applicable.
- If you are not a US citizen, provide a copy of your green card (both sides)
- If you are not a permanent resident provide a copy of your H1 or L1 visa.
At this stage, you may also want to review your credit report. Your credit has a big effect on your rates and the amount you can borrow. Good credit gets you better rates and a stronger negotiating position for terms. Most people are surprised at their report’s contents because errors in reporting are common. Remedying negative aspects on your credit can save you a lot of money in the long run. Now is the time to clean them up.
Document Submission and Underwriting Disposition
Once you have submitted your application, your lender will request some or all of the documents listed in Step 1, and possibly additional information as well. Which documents will be required depends on many factors, including whether you are self-employed or an employee, whether you own any interests in real estate already, whether you have student debt, and other such things affecting your credit risk. During this process, your processor is your best friend and should walk you through each information request and explain what documentation is needed and what alternatives may suffice.
An underwriter will examine your file to make a final determination on your loan. He will check to confirm that you and the loan file meet the guidelines for Freddie, Fannie or a governmental program. He will either approve, deny or ask for additional information. Our Loan Advisors and processors have proven effective advocates for borrower who might otherwise be on the edge.
Closing and Funding
As your closing date nears, your mortgage broker and real estate agent should check its progress on a daily basis, because staying on top of things means you’ll know immediately if there’s a problem that must be dealt with.
For your closing you should bring all of your documentation that you’ve used during the whole mortgage shopping process. At the closing itself, everyone involved in your transaction will be present (buyer, seller, closing agents and attorneys). You will sign the necessary legal documents, pay your closing costs and escrow items and receive your closing documents.